"Marketing Fee"

A place to discuss where and how to market our products. Users can share experiences with value-added enterprises, ask for information on costs, and find out who's paying what for what kind of lambs.
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jpa
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"Marketing Fee"

Postby jpa » Sun Aug 25, 2013 7:30 pm

I was talking to a ram buyer the other day and through the conversation we decided that we were going to investigate a potential "partnership" where they market some of our finished lambs. They currently have an established customer base selling pork and some lambs and they could sell more lamb than they produce.

What would be a fair sales commission to pay someone to market lambs. This could be a great thing for us because at this time I would rather focus on raising sheep rather than marketing. Lets assume that the only thing they did was market the product and coordinate all of the details for slaughter as well as the communications with the customer. Lets also figure that a whole lamb would cost the customer on average $325, with $85 of that going towards slaughter and processing.

Thanks in advance.

Jason

clunmules
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Re: "Marketing Fee"

Postby clunmules » Sun Aug 25, 2013 9:13 pm

Jason,

Any reason why you just can't sale the lambs outright to that potential partner?

I would prefer selling straight up over giving someone a commission to market my lambs. The reason being is that if for whatever reason (and there are plenty) if a potentials partner customers go away I could be left with more lambs than I want to market.

If I have 10 lambs that are ready for the market, but no market for them, I could hold them. On the other hand if I have 200 lambs that are ready for the market and no place for them, it could really wreck my balance sheet.

In reality, the potential partner is really the middle man. That being the case, the middle man should take some risk. Working on a commission only basis there is little incentive for the middle man to market my lambs, when at the same time they have there own lambs and probably other producers lambs in the pipeline. Therefore consistency and quality become the customers number 1 complaint. Neither of those mistakes are good for my business.

But to answer your question, 30% of the cost of the lamb is what I would consider fair. The middle man or its customer pays for the processing.
Jeff Rogers
Aspen Hollow Sheep Station
100% USDA Certified Organic GrassFed Lamb and Wool

Bill Fosher
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Re: "Marketing Fee"

Postby Bill Fosher » Mon Aug 26, 2013 4:36 am

I would echo Jeff's concerns about skin in the game and quality and consistency. I've been involved in two marketing cooperatives that failed with a commission of 26 percent for non members and 22 percent for members, so Jeff's suggestion of 30 is probably a good baseline. That 26 percent was taken off the hot hanging weight price, with the coop paying for killing and any butchering required by their customers. These groups were in the business of providing fresh lamb for white table cloth restaurants in NYC and Boston, and the lion's share of their expenses (other than the carcasses themselves) were in delivery.

Quality and consistency were issues for both operations, but were overshadowed by spottiness of supply and cash flow. The supply issue caused them to accept substandard lambs, which then created a new set of problems. Cash flow was a problem because they were selling to restaurants, and the sales force got paid even if their customers didn't pay their bills.

Ultimately it was the cash flow problems that did them both in, I think. At one point one of them was into me for about $35,000, which was very scary. I got my last check from them shortly before they dissolved, but others were not so lucky.
Bill Fosher
Westmoreland, NH

jpa
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Re: "Marketing Fee"

Postby jpa » Tue Aug 27, 2013 4:54 am

Thanks for the input. I am not sure how we will arange this, but I appreciate the advice as this is new to me. At this point, if something happens it would only be our lambs and the ones they raise although they are considering selling their ewes. I will talk to them about the option regarding buying the lambs outright, but the one thing that I would like to avoid is a situation where we are always "chasing" the commodity market. I am more interested in more of a situation which is mutually beneficial, and from what I see at this point they are too.

Thanks again. I will let you know how this progresses and I welcome more advice.

Jason

sdbailly
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Re: "Marketing Fee"

Postby sdbailly » Wed Aug 28, 2013 11:39 am

I have a deal like this with a cattle farmer, except that I am finishing and marketing his steers (sort of like a custom grazing arrangement where I take the animals all the way to the end customer). We split all profits 50-50. He doesn't have the pasture to finish beeves or the time to direct market. I don't have the capital to purchase cattle outright; however, I can use more mouths on my pasture, and this helps me vary my stocking rate. I also have access to processing facilities and markets (he is in another state with no custom slaughterhouses). We may be adding lambs to the equation next year as he also has a flock of sheep. Would the middle men make more sense if they were adding value to the animals too (i.e. finishing)? Is that something you could trust them to do? Is it something that might benefit your operation?

Just wanted to share my arrangement as it seems similar to what you are exploring...
Sarah Bailly
South Louisiana
Pasture-Based


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