How Other Disciplines Improve Your Marketing: Financial Accounting

Sometimes understanding a little accounting can help you do your marketing work better. Especially investment decks, as you will see below.

Not long ago, an Israeli agro-tech startup looking for Round A investment turned to me to create their investor deck. When I met them, I was captivated by the simplicity and brilliance of their solution that introduces full automation to dairy farms and reduces the number of human workers dramatically.

However, when they outlined the benefits to the farm, they came to a mere 5% savings in labor costs. Something didn’t seem right so I asked them to show me a typical profit and loss statement of a dairy farm. Turns out that in mid-sized farms labor constitutes around 15% of total operating costs (labor costs, together with labor shortages, high turnover, and lack of skilled workers, are the biggest challenges facing dairy farms today).

I also learned that dairy farm net profit typically stands at around 3-4% of the total gross production. This means that labor savings by our solution translate to an increase in net profits of 47% in small farms, 130% in mid-sized farms, and 37% in large farms (and why is the increase in net profits highest in mid-sized farms? It’s the worker-per-stall ratio).

Now, this is a much more dramatic result! It's also an important advantage in a market with highly fluctuating milk prices (with such small margins, farmers often incur losses, so a solution that increases net profits by over 100% makes a huge difference).

To make a long story short, we created an investor deck highlighting the dramatic increase in farm net profits (and other advantages, not least of which is being gentle to the cow). Our customer raised $1.5M in Round A Investment and will begin commercial production in Q4 2020.

(The picture shows some friendly cows at the farm where R&D takes place).