Thoughts please.....

[Tim G]

I'm after some thoughts, ideas and advice please.
This afternoon I've had an email from a chap in London, he says he's setting up a dairy and looking for a supplier of high quality milk which he is aiming to pasteurise, bottle and deliver. He is suggesting he would need between 500 to 1000 litres a day. He has asked if we could supply him milk.
I am initially cautious, we currently produce around 100 litres a day and sell it ourselves, so this would be a massive step up. I'm also nervous of dealing with a new business and becoming reliant on them (ie what would we do if they suddenly packed up?).
But then I'm thinking about it a bit more, we are moving on with our parlour build, we have space for more cows, we have someone locally keen to sell us some more cows, so it's doable (would have to borrow £s though).
I've held off replying to him, but thought I'd get some opinions here first. Too risky or maybe just the opportunity we need?

 

[O'Reilly]

You are right to be cautious. You have to ask yourself how it would work out if he did go under, bearing in mind that there are not many buyers in your area, and you still wouldn't have a huge volume by other people's standards. On the face of it, I think you are doing a marvelous job as you are. Also what price is he willing to pay and how long for?

 

[Sid]

Who supplies him now? Why has he dumped them?
Credit insurance?
What if he leaves you in lurch?

What price will he pay.
How quick can any investment be paid off and need a water tight contract.

 

[RushesToo]

I'm after some thoughts, ideas and advice please.
This afternoon I've had an email from a chap in London, he says he's setting up a dairy and looking for a supplier of high quality milk which he is aiming to pasteurise, bottle and deliver. He is suggesting he would need between 500 to 1000 litres a day. He has asked if we could supply him milk.
I am initially cautious, we currently produce around 100 litres a day and sell it ourselves, so this would be a massive set up. I'm also nervous of dealing with a new business and becoming reliant on them (ie what would we do if they suddenly packed up?).
But then I'm thinking about it a bit more, we are moving on with our parlour build, we have space for more cows, we have someone locally keen to sell us some more cows, so it's doable (would have to borrow £s though).
I've held off replying to him, but thought I'd get some opinions here first. Too risky or maybe just the opportunity we need?

I'd ask to see his business plan and current cash flow - not that bluntly obviously, you just need to see if the numbers stack up. Maybe see if there is an option for a stake in the company if you believe it has a future [check the P&L / assets first clearly]

 

[jimmer]

That's potentially 75 cows Tim, think carefully

 

[S J H]

Unless he's already going @Tim G i'd be worried about how he knows what he needs already.

From following you on Facebook I think you're doing a great job of what you're doing, I was showing my wife the other week, but she said she'd divorce me if I started dairying.

 

[I thats it]

Personally I'm a risk taker. the advice I'd give is do your research into him, his idea and past dealings then balance the risks with the reward.

 

[Sid]

Is he going to using your USP for his gain?
Can you tap into his market?

 

[som farmer]

I think the answers given = caution
what would happen, if, he asks for more than the usual 30 days payment ?
what if he doesn't pay
what happens, once you spend the money, and he wants to drop price, or you ?
for the money you would need, would it be cheaper to buy a vending machine ? Then, you could grow your herd on a need to basis, also it would give you a chance to sell other stuff, eg eggs.
Not saying it wouldn't work, it could work very well, but it is you that carries the risk.

 

[pappuller]

I'm after some thoughts, ideas and advice please.
This afternoon I've had an email from a chap in London, he says he's setting up a dairy and looking for a supplier of high quality milk which he is aiming to pasteurise, bottle and deliver. He is suggesting he would need between 500 to 1000 litres a day. He has asked if we could supply him milk.
I am initially cautious, we currently produce around 100 litres a day and sell it ourselves, so this would be a massive set up. I'm also nervous of dealing with a new business and becoming reliant on them (ie what would we do if they suddenly packed up?).
But then I'm thinking about it a bit more, we are moving on with our parlour build, we have space for more cows, we have someone locally keen to sell us some more cows, so it's doable (would have to borrow £s though).
I've held off replying to him, but thought I'd get some opinions here first. Too risky or maybe just the opportunity we need?

At the moment you are in control of your pricing structure, when you start supplying to a 'retailer' you move from been a price maker to a price taker just like the rest of us.
What are your plans for growth as you stand at the mo moment ?
Personally I would concentrate on increasing what you do at the moment as from my vantage point you are doing an excellent job and growth is coming to you.

 

[Tim G]

All great responses, thanks, and pretty much in line with my thinking. I just sometimes wonder if I'm too risk adverse and end up missing out on some opportunities because of it!
What I don't know is if he is looking for one supplier or a number of producers, which might throw a different light on things. I think I'll invite him up for a look around and get a feel for what he's about.
Last year we got involved with a local ice cream maker who was taking around 350 litres a week, there was lots of noise encouraging us to increase numbers and then one day she turned up wanting more milk, the next we had an email saying she didn't want it anymore. I'm keen not to be in that position again!

 

[Ducati899]

Who supplies him now? Why has he dumped them?
Credit insurance?
What if he leaves you in lurch?

What price will he pay.
How quick can any investment be paid off and need a water tight contract.

Hasn’t dumped anyone if he’s not setup yet surely

 

[Tim G]

Yes, new set up.

 

[som farmer]

Yes, new set up.

could it be set up from your farm ? that way, you would still have some control.

 

[RushesToo]

I would detinitely start this conversation with a view to being a partner not just a supplier, easier to back down from an opening offer than to ask for it later when it has become sucessful.

 

[Slowcow]

That's potentially 75 cows Tim, think carefully

Just from a practical point of view jimmers got a good point.
I've read your posts with interest it doesn't all need to be big bucks
At the moment I'm milking 65 through a six abreast, that is enough. Milking was much more pleasant doing 40!

 

[buffalo_soldier]

You have to explore things, doesn't mean you have to commit.

Few years back I had a restaurant approach me about providing Wagu beef.

Did my research and decided on my position. Their position was to just deliver the steak cuts they require.
So we were way off and nothing came of it.
The restaurant also closed down before the first cuts would have been delivered anyway ?

 

[Smith31]

Be careful please, London is one of the hardest places in the world to start a new business. You could be left high and dry overnight by the new business.

With all due respect, you are not producing anything which can not be purchased from many other larger more efficient farms, so you will always be expected to offer a keen price.

Becoming bigger does not always guarantee more profits. Best of luck with whatever you choose.

 

[buffalo_soldier]

Be careful please, London is one of the hardest places in the world to start a new business. You could be left high and dry overnight by the new business.

With all due respect, you are not producing anything which can not be purchased from many other larger more efficient farms, so you will always be expected to offer a keen price.

Becoming bigger does not always guarantee more profits. Best of luck with whatever you choose.

Easiest thing would be to do the deal with the Londoner, buy the milk elsewhere and rebrand it

 

[Smith31]

Easiest thing would be to do the deal with the Londoner, buy the milk elsewhere and rebrand it

I don't know a great deal about the dairy industry. However, we wholesale meat into London, there are firms like Medina who are selling milk into the shops for next to nothing to eradicate competition, it's such a cut throat market in bigger cities.

To start a new business within London is extremely difficult, due to the massive operating costs such as rents, parking and congestion charges etc.

It's just my few pennies worth, I may be completely wrong.