Friday, February 26, 2010

What happens to your reputation when you unknowingly use deffective raw goods?

Earlier this month, I wrote about the Toyota recalls. The recalls were caused my manufacturing issues on Toyota’s part and have had a major effect on the company’s reputation. But what happens to the reputation of a company if the cause of a defect is not the manufacturer but the supplier of raw goods? This is exactly what happened to E&J Gallo, the largest family-owned winery in the United States.
Twelve employees of Ducasse and Sieur d'Arques, suppliers to Gallo, were convicted last week for selling incorrectly labeled wine to E&J Gallo. The accused sold 18 million bottles of wine that was labeled as Pinot Noir, but was actually made from less expensive local grape varieties. The fake Pinot Noir sold to Gallo was bottled and sold under the name “Red Bicyclette”. The scam lasted from 2006 to 2008 and profited about 7 million euros. A French judge sentenced the 12 to jail and fines ranging from 3,000 to 18,000 euros each.

It seems Gallo is trying to keep the situation quiet, unlike Toyota and their problems. On the Toyota website, there is a large box that says “Get the latest updates here”. On the Gallo website, I had to do some searching. Under the “Press Room” tab, I found 1 press release. In that 1 press release, Gallo leaves a statement only 7 lines long. In the statement, Gallo expresses their disappointment for the mislabeled bottles and declares that less than 20% of the imported wine used to make Pinot Noir was from the corrupt suppliers. Also, the press release states that the imposter wine has been removed from the marketplace.

As an agricultural business owner, do you think Gallo has done enough to reassure the public that their wines are labeled correctly? How would you handle a situation involving misrepresented raw goods that you use in making your agricultural product? As a consumer, is a single press release (only 1 paragraph long) sufficient? Do you think you will still trust Gallo even if this wasn’t their fault?

Thursday, February 18, 2010

Budgeting for your small business

Let’s pretend that you’ve just thought of a great agricultural business idea and you want to jump right into becoming an entrepreneur. This sounds great, but there are many steps missing in between the “great idea” and actually opening a business. One of those key steps is creating a budget. A business idea may sound great, but you can’t go anywhere with it if the idea isn’t financially viable. To assess the financials of creating a business (and maintaining it), you must create a budget.
The purpose of a budget is to carefully map out how you will spend your money (and how money has been spent in the past). What exactly should be included in a budget? Very simply, a budget should show where you will be spending your money. This may include rent or mortgage, utility bills, payroll expenses, supplies, etc. A budget is not a one-time creation, but a living, working tool that will help you plan for the future. If an unexpected problem arises (like a sudden increase in supplies), you should go back to the budget and evaluate how this problem will affect your profits.
The intention of a budget is not to intimidate you, so don’t make it so complex that you can’t understand it. Your budget should be specific so that you can see where you may be over-spending (or under-spending in the case of expanding your business), but it shouldn’t be so complex that you are spending all of your time and energy on it. For example, office supplies are an expense that should be included on your budget, but is it really necessary to calculate the cost of using 15 paper clips per week? If budgeting in general is not your forte, consult a professional. In a recent article on, author Trent Hamm suggests getting the help of an accountant. “The more eyeballs you get on your goals and plans for future spending along with your records of how you currently spend, the better off you are.” article is a great resource for learning about budgeting and other types of financial planning for your business. In one article, they list 6 tips to help you create a budget that will help you plan for the future of your business.

Tip No.1: Check Industry Standards
Not all businesses are alike, but there are similarities. Therefore, do some homework and peruse the local library for information about the industry, speak with local business owners, and check the IRS website to get an idea of what percentage of the revenue coming in will likely be allocated toward cost groupings. Small businesses can be extremely volatile as they can be more susceptible to industry downturns than larger, more diversified competitors, so you only need to look for an average here, not specifics.

Tip No.2: Make a Spreadsheet
Prior to buying or opening a business, construct a spreadsheet to estimate what total dollar amount and percentage of your revenue will need to be allocated toward raw materials and other costs. It's a good idea to contact any suppliers you'd have to work with before you continue on. Do the same thing for rent, taxes, insurance(s), etc.

Tip No.3: Factor In Some Slack
Remember that although you may estimate that the business will generate a certain rate of revenue growth going forward or that certain expenses will be fixed or can be controlled, these are estimates and not set in stone. Because of this, it's wise to factor in some slack and make sure that you have more than enough money put away or coming in before expanding the business or taking on new employees.

Tip No.4: Look To Cut Costs
If times are tight and money must be found somewhere in order to pay a crucial bill, advertise, or otherwise capitalize on an opportunity, consider cost cutting. Specifically, take a look at items that can be controlled to a large degree. Another tip is to wait to make purchases until the start of a new billing cycle, or to take full advantage of payment terms offered by suppliers and any creditors.

Tip No.5: Review the Business Periodically
While many firms draft a budget yearly, small business owners should do so more often. In fact, many small business owners find themselves planning just a month or two ahead because business can be quite volatile and unexpected expenses can throw off revenue assumptions.

Tip No.6: Shop Around for Services/Suppliers
Don't be afraid to shop around for new suppliers or to save money on other services being performed for your business. This can and should be done at various stages, including when purchasing or starting up a business, when setting annual or monthly budgets, and during periodic business reviews. article

As an agricultural entrepreneur, how has budgeting helped you plan for your business’s future? Has your budget helped you realize an area you were over-spending or under-spending? Do you have any advice for those thinking about starting an agricultural business?

Friday, February 12, 2010

What can business owners learn from the Toyota recalls?

In the last 2 months, the news has been flooded with information about the recent recall of over 7 million Toyota vehicles. The safety issues with these vehicles has left many Toyota owners stressed out and has future car buyers reluctant to buy a Toyota. As a business owner, safety issues with your products can kill your business (for example, Chi-Chi’s). As always, you should strive for constant safety checks. But what if you find previously sold products that are deemed unsafe? In this post, I will discuss some of the steps Toyota has made to help ease their customers’ minds.

On their website, Toyota lists the vehicles affected, steps to take if your vehicle has been recalled, and multiple videos. The videos include descriptions of the safety problems and how Toyota will fix it. The first video describes the pedal sticking issue. Also included is a video message from Toyota President, Jim Lentz (video 2 below). He offers his deepest apologies for the problems, guarantees that Toyota will fix the problems quickly, and asks customers for the opportunity to earn back their trust. To further reach out to customers, Toyota recently started airing a commercial described their commitment to fixing the recall issues and restoring customers’ faith in the company (video 3 below).

At the dealership, Toyota is again trying to ease customers’ minds. The company has given each dealership between $7,500 and $75,000 to de-stress customers. To do this, some dealerships have hired a manicurist to do nails while people wait for their cars. Other dealers are driving customers to the movies and paying for tickets while waiting for their car to be serviced.

I don't believe there is any set of steps that will completely erase this (or any) recall from the minds of consumers, but Toyota has stepped up to the plate, fully accepted responsibility, and has worked quickly to fix the problem, which I think will impress future car buyers.

Some analysts predict this recall will cost Toyota between $1.1 and $2.2 billion. As a consumer, have the commercials and apologies from the Toyota President regained your confidence in the company? Do you think Toyota can survive this +$1 billion hit? Do the “stress relievers” like manicures and movie tickets strengthen your perception of Toyota? As an agricultural entrepreneur, have you ever faced a safety issue where a recall was needed? How did you regain the trust of your customers?

Thursday, February 4, 2010

Using smells to increase impulse buys

Have you ever walked into a bakery with the plan of just getting a loaf of bread, but the delicious smell of fresh baked chocolate chip cookies makes you impulse buy a few? By using smells, a food retailer can get customers to make impulse purchases.

The smells of oven-baked bread, fresh ground coffee, warm cookies, and hot soups can evoke positive memories for a customer. The cookies may remind a customer of a Christmas party or the hot soups may remind the customer of a cold winter day at Grandma’s house. Whatever the memory, smell is an important part of marketing. According to the Sense of Smell Institute, people recall smells with a 65% accuracy after a year, but only have a 50% visual recall of photos after 3 months.

"Setting the Mood for Higher Sales" article

If you are a retailer who doesn’t have enticing smells naturally produced at your retail outlet, you may still want to invest some research in the idea of scent marketing. Stores like Sony Style and Bloomingdale’s are using scent marketing to set the mood for customers. Sony Style uses a combination of mandarin orange, vanilla, and cedar which are thought to entice women shoppers. Sony Style also uses this scent combination in every store to create a “Sony brand smell”. Bloomingdale’s uses a baby power scent in their baby department and a suntan lotion smell in the bathing suit department. Also, the ice cream parlor in the Hard Rock Hotel in Orlando uses a waffle cone smell which is thought to have led to a recent 50% increase in sales.

How do these stores incorporate smells into their businesses without producing the actual item? Companies have been created that focus solely on developing your business’s signature scent. One firm, Scent Air (, has produced a technology called ScentWave that dispenses these signature smells.

Scent branding may sound like a fabulous marketing tool, but you must first experience the retail atmosphere in the eyes (or nose) of the customer. Don’t over do it. Customers will not be rushing to the cookie display if your scent brand of cookies smells like 10,000 cookies just dropped from the sky. Subtlety is the key. Customers need a friendly reminder smell, not a smack-in-the-face smell!

"Scent Branding: Smell of Success?" article

As a consumer, do you feel that you make impulse purchases because of positive smells? Has a smell ever led you to not purchase a product? As an agricultural entrepreneur, have you seen sales increase when a new smell (like fresh baked bread) fills your retail outlet? Will you think about developing a “scent brand” for your retail space or product?