In 2008 Kevin Kelly wrote an article that changed how people think about small businesses forever.
The blog post, 1000 True Fans, made the case that a creator only needed 1000 true fans to make a living.
1000 people! That’s it?!?
Suddenly critical mass for a micro-business became much, much more attainable.
This idea flew in the face of a lot of conventional business thinking, which encouraged you to constantly grow your customer base larger and larger to sell more products.
Instead of acquiring thousands and thousands or even millions of customers, we only had to get 1000 true fans.
The original concept proposed by Kevin Kelly was initially aimed at creators such as artists, musicians, and craftspeople, but I think the theory can work for many businesses beyond that.
Grow Your Total Customers or Grow Your Total Products
If we go back to business basics, how does a business generate a profit?
Revenue (A) – Cost to Produce and Sell the Product (B) = Net Profit (C)
If we want to grow Net Profit, we must do more transactions (assuming A and B are set and cannot be further optimized).
To do more transactions, we can either:
- Sell to more customers
- Sell more products to our existing customers
Option 1 is a model that focuses on scaling up by selling to more customers. The goal is to keep finding new customers to sell a line of products to. These are the types of products you typically see on Shark Tank, where the strategy is to sell something to as many people as possible.
Option 2 is a model centered around creating more products for a fixed (or slowly growing) number of customers.
Option 1 or Option 2 for Your Farm?
It depends. There isn’t a correct answer, but Option 2 is probably easier to achieve for most small businesses because the costs of acquiring new customers are usually very high.
If you go with Option 1, then the growth or sustainability of your business means you constantly have to find new customers. That requires either a lot of time, money, or both; time to promote your product and money to spend promoting it. Both may be in short supply if you are the producer of your product (compared to someone who orders something from a factory and has the finished product shipped in).
You also need to consider what you are selling. Option 1 means you are going to try to sell to as many people as possible. That means that the product you are selling has mass-market appeal. Food qualifies as a mass-market product, but you need to join the incredibly competitive grocery store distribution system to get a food product out to a very large audience.
What if I sell as much as I can locally?
If you are in a small market and your product doesn’t ship, you will eventually exhaust your local customer base. There is only so much meat or honey or bread that you can sell to a set group of people.
This is where a lot of small businesses struggle, they want (or need) to grow their sales, and they struggle to find more customers.
In contrast, Option 2 (sell more to existing customers) is more practical in smaller markets with goods that aren’t mass-produced.
You don’t have to produce one product and sell it to as many customers as possible, and this is where your 1000 true fans come in. Kevin Kelly describes a true fan as:
“A True Fan is defined as someone who will purchase anything and everything you produce. They will drive 200 miles to see you sing. They will buy the super deluxe re-issued hi-res box set of your stuff even though they have the low-res version. They have a Google Alert set for your name. … They can’t wait till you issue your next work. They are true fans.”
As a farm business with 1000 true fans, your goal is to give those fans everything they want.
Instead of just selling them salad mix, you could sell them salad mix and carrots and tomatoes; instead of just selling them vegetables, you could sell them flowers; instead of just selling them vegetables, you could sell them spice blends. You get the idea; the potential is unlimited.
Let’s be clear Option 2 isn’t less work. It’s just different work. With Option 2, you are trading customer acquisition for production. In other words, instead of finding a new customer to sell to, you are finding new products to sell to your customers.
Which model is better?
Again, it depends.
What type of product do you have? Is it something that someone buys once a year or very infrequently? Compare honey and milk. Most people will purchase milk once a week and honey once or twice a year. Some products naturally lend themselves to selling to the same customer base over and over again.
How is the product produced? Let’s compare salad mix to salad dressing. To produce more salad mix, you have to have more land and then grow more salad mix. It’s not easy to scale. If the land is fixed, then your production level is basically fixed. In contrast, salad dressing is theoretically infinitely scaleable, and it might be more efficient to produce more units than fewer units.
Once produced, is the product shelf-stable? If it is, then you can produce it and let it sit on a shelf while you try to go sell it. If the product is perishable, then you have to sell it right away. Option 1 lends itself to salad dressing, while Option 2 is for salad mix.
What type of person are you? Are you a networker, good at promotion? Can you take advantage of online advertising and marketing? If so, then Option 1 might be good for you.
How much money do you have to spend to acquire more customers? With online advertising, you can spend money to get customers, but can you pay enough to get the customer growth you want? With the right strategy, you might get your customer acquisition cost down with advertising, but it will still require money (and time).
What does your market look like? How large is it? Could you sell to more customers, if so where and how? How far do you have to go to reach more customers?
Run some basic calculations. How many units do I have to sell to reach my financial goals? Can your location support that many units? If your location is a limiting factor, then Option 2 might be a better fit.