The past few lessons have all focused on lessons from our conversation with Teddy Ruge centered around individual topics. This last one follows the story of one of his businesses: Raintree Farms. It covers topics we’ve gone into more detail on in other lessons, but seeing how they all tie together is useful.
##Early Struggles
“we struggled for quite a while, from inception up to last year when we deployed a new model. We struggled with access to raw materials. We know the farmers have plenty of land, but it took us a while to realize the meain problem is capital to cultivate the land. So we had to pivot.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Raintree Farms had its fair share of difficulties in the early days. What’s important is how Teddy and his team responded to them. Each time, they would pivot, switch to a different model and test it to see if it would work. Instead of leading them to failure when the first model didn’t work, this strategy has allowed them to adapt until the found the right model.
Through those pivots, the most important conclusion was working capital.
##Handling Working Capital
“Working capital becomes a barrier. We’ll buy everything you plant, they have 5 acres but they can only afford to cultivate a small portion. So we flipped that model completely, every farmer had to dedicate equal actrage to the crops we need. That meant hiring the farmers from the start and giving them a monthly salary. We calculated how much one hectare can produce and divided it into monthly payments, so we front-endeded their working capital and distributed it throughout the year.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Solving Raintree Farms’ working capital problem required a new model. As Teddy explains above, it meant hiring farmers and telling what to plant and how much. While this may sound dictatorial, what it did was give farmers a more reliable income distributed throughout the year, adding to their quality of life and spreading risk.
But getting farmers to work within this system meant hiring and training them.
##Hiring and Training
“We start with a 3 month training period, we have a company owned plantation where they can learn the methods, and it’s paid. We have extension workers who take care of any questions they have. We check in every 2 weeks and give performance check ups.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Obviously, working within this new Raintree Farms system was different than how farmers were used to working, so some training was necessary. Teddy aimed to make this transition easier by ensuring the training was paid and included performance check up to make sure things were being done correctly.
##Handling Price Fluctuations
“The prices for what we grow are currently going up, making our access to raw materials more expensive, which is why we went to this model. We took the average and paid the farmers for that. We can predict our raw materials cost because they’re separated from the open market. The more expensive the end product gets, the more profitable we are because we own the entire value chain. We control costs from garden to shelf.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Another main challenge Teddy faces with Raintree farms is the same any farming business faces: price fluctuations. That’s where the integrated Raintree Farms system came into play. By making costs more predictable, Raintree is able to focus on improving processes regardless of the ultimate sell price. The system keeps the company focused on making practical advancements.
“Because we have a company owned farm, we know the metrics in terms of farming that product, we know we’re going to have good controls in terms of farmers working with us. It’s not like we begin paying them and don’t show up We have extension workers go out every two weeks to make sure the product is taken care of.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
##Market Demand
“The market was already there for us, our biggest problem was that we couldn’t access enough raw materials to meet market demand. It’s been 5 years of pivoting to figure out the model and what would work, that required funding.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Another core problem for Raintree Farms is adapting to meet market demand. As Teddy explains above, it took outside funding to give him the flexibility to try many different models and figure out which one addressed this problem the best.
“Customers are coming to me with requests for many tons, but i don’t have the raw materials to make even half a ton. So it becomes about relationships, we say it will take X time to produce it, will you pay 50% down so we can continue operations? If you have enough of a relationship with that customer then you win them over and self fund to get those materials.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Ultimately, Teddy found that pre-payments solved this problem. For more information on how he built the trust necessary to make that model work, check out our lesson on prepayments.
##Looking Toward the Future of the Business
“We see potential in that changing their lives and making the company more profitable. We’re not beholden to falling or rising market prices because we get the crops at the same price so it’s up to us to input efficiencies into the system to stay profitable.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab
Ultimately, Teddy is optimistic about the future of Raintree Farms because he sees the company’s incentives pointing it in the right direction. Beyond that, he’s scaling and expanding his business with care to make sure it has what it needs to succeed. So far, that’s worked very well for them.
“You have to be willing to watch your business model evolve, you have to pivot your business model towards that. If you have too many farmers coming, it can crush your business. There may be 1000 farmers who want to come work with you, but you might not be equipped ot handle them.”
-Teddy Rouge, Founder of Raintree Farms, Co-founder of Remit.ug and Hive Colab