The story that helped me double my small farm’s hourly returns (after years of losses.)
My wife and I ran a pastured poultry business for four years, and most of that time we somehow managed to lose money. Despite hours of manual labor building coops, hauling grain, and moving animals around, we somehow wound up poorer than when we started by the end of year two.
We eventually found the light at the end of the tunnel, but only after years of trial and error. In hindsight, most of the solutions were glaringly obvious. I just didn’t have the experience or free time to identify and execute them.
Everything I talk about in this article is stupid, obvious stuff you probably already know. Heck, I already knew this stuff, but I didn’t act on it properly!
Any first-year business major could recite the lesson I’m trying to share, but lessons rarely stick. Stories tend to stick. Maybe this story will stick with you.
The fact is that I failed to apply my knowledge until I reached a point of failure and desperation that I couldn’t stomach it anymore. I think most experiences are like that.
One of the things that helped me kick our business over the top was a story about John Rockefeller and cans of kerosene. I’ll tell his story in a moment, but first, you might be wondering: “what is pastured poultry?”
Pastured poultry are chickens raised in open-bottom coops that offer birds access to fresh grass and tasty insects. This method benefits the pasture, the animals and the quality of the meat we harvest from them.
The key to the whole thing is the farmer dragging the coop forward 10 feet every single day. If the birds stay in one place for too long, the grass dies and the chicken coop turns into a pigsty (please laugh.) We also have to restock each coop with grain and water and do a wellness check on the birds to ensure they are in good health.
Now that you know what pastured poultry is, you may be wondering, “Why would you do any of that and expect to make money?” Well, mostly because we believe in humane, healthy agriculture and we love doing it. Beliefs don’t pay the bills, but we know plenty of people who use this business model and manage to earn a decent profit!
Unfortunately, we struggled just to break even in our first few years of raising poultry. Not only was my failure demoralizing, it was also a massive hit to my ego.
When we failed to profit in year one, I chalked it up to startup costs and did some back-of-napkin math that assured me we would be rolling in chicken-bucks the following year. When another growing season left me with a shrinking bank account and an aching back, I had to confront the painful truth.
My sloppy bookkeeping and gut feelings weren’t going to cut it. I needed to get serious to figure out where we were going wrong.
I was lying in bed reflecting on my apparent incompetence when I remembered a story on a business podcast years ago. It was the story of Rockefeller and his cans of kerosene:
Rockefeller was relentless in ferreting out ways to cut costs. During an inspection tour of a Standard Oil plant in New York City, for instance, he observed a machine that soldered the lids on five-gallon cans of kerosene destined for export. Upon learning that each lid was sealed with 40 drops of solder, he asked, “Have you ever tried 38?” It turned out that when 38 drops were applied, a small percentage of the cans leaked. None leaked with 39, though. “‘That one drop of solder’, said Rockefeller,…’ saved $2,500 the first year; but the export business kept on increasing after that and doubled, quadrupled–became immensely greater than it was then; and the saving has gone steadily along, one drop on each can, and has amounted since to many hundreds of thousands of dollars
From “Of Rebates and Drawbacks: The Standard Oil (N.J.) Company and the Railroads,” by Michael Reksulak and William F. Shughart II.
A simple story, with a simple lesson: Pay attention to the little details. Even the smallest gains in efficiency compound over time.
Even though I suspected that I would not find myself at the helm of “Standard Poultry” anytime soon, I decided to go through our entire business with a fine-toothed comb and make spreadsheets for every bit of data I could get my hands on.
I hoped that if I reduced our productivity to an algebra equation, I would be able to isolate the most important variables and eliminate the inefficiency I knew we must be guilty of.
I recorded every possible chicken-related expenditure. Price of chicks, cost of grain, the gas we burned picking up grain, ice, wood shavings, supplements, repairing coops, mortality rates… You get the picture.
Next, I scoured the markets for the absolute best deals on everything we needed for the following year. I found bulk pricing wherever possible and remade our schedule to accommodate the higher volume of products and supplies.
Believe it or not, I was getting excited. I knew I was approaching the holy grail of profitability. I would be the savvy farmer/businessman I always wanted to be.
The crazy thing is none of my research made that big a difference. I was finding opportunities to cut costs left and right, but at our tiny scale the savings didn’t add up to very much. I felt more prepared and educated for the coming year, but the real problem was our hourly return on labor.
With our original model, I found we were working for approximately $15 an hour, and investing thousands of dollars up-front for the right to do it. That wasn’t sustainable and I knew it, but I couldn’t figure out where my extra drop of solder was going.
It took a few more spreadsheets, but I finally found it.
The spreadsheet that cracked the code totaled every individual minute we spent per chicken. Time spent putting chicks in the brooder. Time spent moving the chicks out to pasture. Time spent moving the coops (divided by the number of chickens in the coop.)
Wait a minute. Divided…. by…. the number of chickens…. in the coop?
Our coop size was too small. It was that simple.
I built our coops to accommodate 50 chickens. Servicing one coop takes 10 minutes. A small amount of time, but it adds up over the life of each chicken (15 minutes cumulatively, if you were wondering.) A larger coop takes roughly the same time to service.
By doubling our coop size, I could cut that 15 minutes per chicken to 7.5 minutes per chicken. My hourly returns would shift from ~$15 per hour to something like $25 per hour. That added up to thousands of dollars across a single growing season.
I found the extra bead of solder. Along with all the other little cost savings I’d scraped together, our poultry business was finally going to bring in some cash! All I had to do was buy in bulk and build some new coops.
In the end, the solutions that carried us to profit were blindingly, embarrassingly obvious.
Whether you’re purchasing inputs or investing time in outputs, the economy of scale works. I warned you at the beginning of this article. Everything I’ve written here is basic stuff, but knowing something doesn’t mean you have the experience (and accumulated failures) to apply the knowledge.
You might be the sort of person who could have instantly pointed out the weak spots in our business plan. If you are that person…. Good for you! Seriously!
I’m not that kind of person. Most of us aren’t. I’m a back-of-the-napkin-math start-the-project-yesterday-before-fully-thinking-it-through kind of guy.
In my opinion, the best way to trigger real change and learning is through stories. Stories lodge in your mind and alter your mindset. Knowledge usually sits dormant until a narrative wakes it up. You don’t remember that stoves are hot — you remember the time you touched a stove and got burned.
I hope this particular story will stick in your brain and poke you when you need it most. Then you can tell the story of how Rockefeller’s cans of kerosene convinced a chicken farmer to build bigger coops, and then in turn made you do something a little bit smarter.
Keep the chain going!
