Joel Salatin and his business, Polyface Farms, are my primary inspiration for starting an entrepreneurial farming enterprise. The self-described Christian libertarian environmentalist capitalist lunatic farmer is, if you'll indulge my editorializing, a triple-bottom-line genius. His enterprise makes money, is environmentally sustainable and builds community and social capital.
A key tenet of his business advice to prospective farmers is to avoid sinking money into fixed assets upfront. In contrast to the economies of scale (enabled by advancing technology along all fronts of the farming industry) that drive industrialized agriculture, he advocates starting small, avoiding upfront investments in permanent infrastructure and shiny John Deere's. In his somewhat hyperbolic view, bootstrapping leads to prosperity; leverage to a form of modern indentured servitude, poverty and, ultimately, bankruptcy.
His advice to prospective farmers is to start small. Sell direct to consumers to maximize margins and harness natural symbioses to one's advantage. If one is willing to embrace the simplicity and thriftiness of pastoral life, starting small minimizes risk and maximizes quality of life (in a rural/Christian/libertarian/environmentalist/capitalist/lunatic kind of way...seriously, Youtube this guy--he's great! On debt-as-enslavement here).
Anyway, I'm all for this. Starting small and slowly increasing our production volume as we increase our capacity would be great. The problem is that hydro/aquaponics requires the upfront investment in the greenhouse, fish tanks, pumps, etc. Not to mention the higher price of land in the city versus in the country. So we are locked into some significant fixed costs. Like Prof Z says, once you are locked into doing something small, you might as well go big because the two require the same energy.
This is where the pricing and distribution come in. Staying small lends itself well to direct to consumer, premium prices, healthy margins, etc. Going bigger means finding high volume consumers. If we can do this without entering the traditional wholesale market-great. Unlikely, though. And once we enter the wholesale market, we lose a lot of our flexibility. Cost-cutting becomes paramount. At that point, we are competing with rural farmers whose fixed costs are substantially less than ours. We are giving away our biggest competitive advantage--our physical proximity to retail markets.
So we're in a fuzzy middle area. The ideal would be to grow a massive direct-to-consumer distribution network. Build a food retail business as much as build a farm business. But when you look at trying to sell $400 bucks of lettuce a day 5 days a week, 50 weeks a year to hit just $100,000 in sales, it looks like a lot of work. The more number crunching I do on marketing and sales, the more I'm convinced that the main barrier to urban farms isn't the factors of production--it's factors of distribution. Did I mention that our product's shelf life is a day or two?
Again, it would be ideal to slowly ramp up production. The fixed costs of a greenhouse, etc. mean that our production growth curve is a stepwise function, not a smooth curve. Matching the marketing a sales aspect of our business to the production side will be a critical challenge. We'll have to be savvy about pricing, branding (particularly if we implement a "discount" pricing scheme to help reconcile our stepwise production function and linear customer growth curve) and distribution.
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