2020 has certainly not been the poster child for “business as usual” but, more accurately, business at its most unusual. The meat processing and supply chain was hit hard this year with disruptions. Temple Grandin discussed alternative business models in a recent article that was published by Forbes. Even if you have no special interest in the beef industry, read on for more information about starting any type of small business in Ohio.
First, Temple notes that weaknesses in the supply chain were exposed. Our meat processing industry is very efficient with just a handful of packing companies handling over three quarters of all U.S. meat. However, when COVID-19 hit those big plants, about 20% of the processing industry screeched to a halt by late April, creating back-ups and retail shortages. Small and local meat packers would have needed to double their processing to cover that shortage.
Temple shares that small processors will likely never hold an equal market share to big packers or be able to completely safeguard against a similar disruption, but we will likely see an increase in small and local processors across the country. Larger companies have greater efficiency through economies of scale including a larger worker to manager ratio. However, a rising interest in locally produced goods may open up niche markets for additional small companies. Niche markets typically charge more for a similar, yet slightly unique version of a product.
Niches may include labels like “local, hand-made, organic, non-GMO, grass-fed, sustainable, Angus, Wagyu” and many, many others. A niche product must have an existing demand or a very strong probability of creating demand. Good marketing skills are a necessity.
What are some keys for success? Specifically related to meat processing, Temple offers the following suggestions. Keep your startup costs as low as possible. Consider a mobile-processing unit (information readily available online regarding semi-trailers built to USDA code) which is much more affordable than a permanent structure. These certainly have limitations though, especially in capacity.
Inquire about the possibility and availability of either state or federal inspectors. All slaughter plants go through inspection, but meat for public sale must have an inspector on-site. Plants that operate under “custom-exempt” status can only process animals for a producer to whom the meat is returned for personal consumption. This meat cannot be sold.
Is a cooperative business model right for you? Temple warns of three common pitfalls. First, fighting among the board on operations and financing. Two, company shares are sold to an outside organization or individual who eventually gains controlling share of the business and either absorbs or dismantles the cooperative. Finally, the temptation to deviate from (or cheat) a profitable niche by producing a generic line of product or misrepresenting the advertised niche. This leads to disgruntled customers. She suggests that staying small and honest is better.
Starting a Small Business
COVID19 has generated a lot of uncertainty and many jobs have been lost and businesses closed. Is this a great time to start your own business? Maybe. Are there risks? There always are. Risk and opportunity often come hand in hand. Owning and running a business are not for everyone, but there may be others who should consider starting or expanding an existing business, farm-related or otherwise.
A great resource for anyone interested in starting a small business is the ohio.gov website. Find the “tools for business” tab and get started investigating the possibilities.
Start by considering and searching for what licenses and registrations you would need for the desired business. Lists of these are available at the ohio.gov website. Your business will need to be registered with the Ohio Secretary of State, Ohio Department of Taxation, Ohio Bureau of Workers Compensation, and the IRS. Businesses that utilize employees require additional registrations and paperwork.
This website also has a new business checklist and a series of frequently asked questions to peruse. Last stop at this website is to fill out the new business questionnaire which includes the following:
- Specifically identify the goods/services your business will provide and the value they will bring to clientele.
- Where will your business be and who will it serve?
- List financial and non-financial goals of owning a business.
- How will you fund the startup?
- Do the projected profits justify the effort and meet your financial needs?
As you become more committed, developing a business plan will be another step. Free help is available at multiple Small Business Development Centers including nearby Ashland University and Kent State at both Stark and Tuscarawas locations.
Matthew Nussbaum is an OSU Extension Agriculture and Natural Resources Program Assistant and may be reached at 330-264-8722.
CFAES provides research and related educational programs to clientele on a nondiscriminatory basis. For more information, visit cfaesdiversity.osu.edu.