“True” CSAs and Pre-Paid Subscription Models
Earlier versions of the manuscript for my upcoming book, Raising Dough: the Complete Guide to Financing a Socially Responsible Food Business, had several sections that I wound up editing out of the final version. For instance, I had to cut out a section that makes the distinction between “True” community supported agriculture (CSA) programs and other pre-paid subscription models. Since the same term “CSA” now lumps together several different approaches to raising funds and marketing goods, it is still important to understand the differences between them! And so I offer this blog post to help you decide which might be the best fit for your farm or other food-based business, philosophically and logistically.
The earliest CSA agreements in the United States were based on models already popular in Europe and Japan. Farmers and a community of eaters add up the farmers’ total costs of living for one year, including operating the farm itself, and divide that by the number of members who had committed to being part of the community. (This is the only model in Raising Dough that contradicts the suggestion that you must separate personal from business expenses!) Each member pays their share of the farm’s costs, usually in advance of the growing season, and receives a share of the farm’s produce every week. In some cases, an association of eaters has come together with the concept of supporting farming and agriculture before recruiting a farmer to provide the important service of growing food. In other cases, the farmers would express their intentions to farm in a community context, and build a community around their farm.
“True CSAs operate outside of a market-based system,” explains John Bloom, senior director of organizational culture at RSF Social Finance. “The food itself is de-commodified, because nobody is buying it.” Rather than purchasing produce, the fruits and vegetables are almost a byproduct of the real work of the farmers, which is more about increasing the productivity of the soil.” He points out that labor in true CSAs is no longer a commodity either, because the community supports the farmers’ work rather than paying for it. “As a member of the community of eaters in the association,” he explains, “you share in the budget of the farm, and in the resulting fruits and vegetables.” In true CSAs, the farmers have no other source of income outside of the cost shares contributed by the association of CSA members. These days, only a very, very small percentage of CSA farms, many of them farmed in accordance with biodynamic principles, operate this way. The great majority of so-called CSAs operate as subscription programs (see below).
John was part of the team that helped facilitate the first CSA conversation at Live Power Community Farm in Covelo, California, in the early 1990s. The resulting agreement between farmers Gloria and Stephen Decatur became the first CSA in the state; John and his family are members of this CSA community to this day. “When a group of us first sat down with Gloria and Stephen to tally up the total costs of running the farm, we suggested that they include costs that weren’t directly related to the farm,” John recalls. “As members of their community, we felt it was important that they be able to afford not only to farm, but to have health insurance and be able to put some money away for their retirement.”
One benefit of this model for farmers is that the community members share in both the seasonality and risk associated with farming: what you include in members’ boxes will reflect exactly what your farm has available. You may only be able to offer produce during limited months of the year, depending on the length of the growing season and which varieties of fruits or vegetables can keep for longer. Early in the season, there may be plenty of greens but nothing else, and later on, lots of squash and root vegetables. If the farm’s entire crop of, say, berries or carrots or apples fails entirely due to a pest infestation or an untimely storm, then by design, your community of CSA members will make do without these products, or seek them out elsewhere; they will have already supported you in your efforts, regardless of what they receive.
Letting your community support you entirely may seem like a foreign concept, but this may be because our current market-based food system has shifted so far from its community roots. “How did it happen,” John wonders, “that the risks associated with the vagaries of the marketplace have become more acceptable than the risk of being in community?” It’s a great question. You may be the type of person that is much more comfortable shouldering known risks outside of your control — such as shifting commodity prices and weather patterns — than with opening yourself up to an ongoing community dialogue, in which case this model is probably not the right model for you. A true CSA model might be a good fit for your farm if the following statements are true:
- You are part of a close community that is committed to a shared set of values. Remember, true CSAs are not about selling food as a commodity. They are about supporting farmers to do their work, in much the same way that a congregation supports the work of a local religious leader. For instance, you may be friends with people who are passionate about organics, but they still prioritize getting the most food for their money, rather than wanting to support, both philosophically and financially, the vocation of farming. If you are a part of such a community, you will know it.
- You — or someone on your team — has excellent communication skills, and is interested in working in community.Of course, a successful farm needs a competent farmer. A CSA also needs an excellent communicator who will be the main point of contact for its association of members. “This need not be the same person as the farmer,” John points out, “and in fact, they usually are different people.” In the case of Live Power Community Farm, Stephen is the lead farmer, and Gloria is the one who is passionate about community. If you do not have someone on your team who can effectively take on this role, other forms of marketing your produce will probably make more sense.
- Your farm can support enough crops to provide sufficient variety to satisfy your members. Just how much variety is enough? This will vary depending on your community, and is beyond the scope of this book, although you can find many resources online about the details of starting a CSA. (In most cases, these resources are actually referring to subscription programs rather than risk-sharing models, so keep that in mind.)
If the above are true you will then need to determine:
- Whether members will contribute to the work of producing or delivering the goods. Some farm-based CSA programs encourage members to visit the farm to help out on occasion. Others offer discounted shares to members who participate in the process of harvesting, cleaning, packaging, or delivering the shares. Still others require that all members contribute elbow grease in some fashion or another. You might see member participation as a great way to keep costs low and further build community, or you might see this as too much to manage. Just be clear about expectations up front to avoid any potential misunderstandings.
- The farm’s total budget for one year, including the farm family’s (or families’) costs of living, plus the full costs of operating the farm. Take into account any savings from volunteer work that members may contribute. In essence, this step involves creating a business plan that includes personal expenses as well as those of the business.
- How many shares to offer. A number of factors may contribute to this calculation, including the amount of land available to farm, the size of your community at large, and the number of people who have already identified themselves as being interested in supporting a true CSA. Once you have this number, divide the farm’s budget by the number of shares to determine each member’s contribution.
You will also need to work out details such as a pick-up and/or delivery schedule, what happens if a member cannot pick up their share, and how all parties will communicate with each other. Once everyone has agreed upon a structure, draw up a document that clearly describes what the farmers and eater members have agreed upon, which everyone can review and sign. It is inevitable that situations will arise that your agreement has not taken into account; meet with a core group of your association of eaters at least annually to evaluate the previous year’s budget and overall experience to identify any necessary changes to share prices, crop plans, the member agreement, or any other aspects of the program. In the meantime, communicate with your community of eaters regularly. Clear communication in the event of any problems or necessary changes to the agreement will also go a long way toward building goodwill and preventing hard feelings.
Pre-paid Subscriptions – Not Just for Farms
These days, it’s rare to find a farm that operates solely as a CSA as described above, wherein the entire farm’s expenses are covered by CSA members, and everything that the farm produces is shared amongst the members. Most farms have a variety of sales channels, which may include farm stands, farmers markets, and wholesale accounts in addition to a subscription box program. Indeed, many people who have never considered the shared risk component think of a CSA as nothing more than a pre-paid subscription for weekly box of produce from a specific farm, or even from a group of several farms that collectively provide the goods that make up members’ boxes. In this model, members generally expect that you will deliver a box with a certain quantity of food inside, regardless of any unforeseen challenges to growing conditions. Even though the entrepreneur or farmer shoulders the risk of not being able to deliver goods due to unforeseen circumstances, the cash-flow benefits of collecting payment ahead of time (for the whole season, quarterly, or monthly) can make all the difference between whether you might need to dip into your credit cards or home equity for the money you need to get through the next season, or not.
In addition to being a helpful financing model for farms, any retail business can sell pre-paid subscriptions to raise money to cover cost of goods sold before you actually need to purchase inventory, giving you a helpful cash cushion. Depending on your business, you might encourage people to subscribe to, for instance, a certain quantity of meat, baked goods, or other product every month. Might a Cheese, Beer, or Salumi of the Month Club work for you? If your products are rapidly-consumed staples (such as bread or milk), you could even offer weekly subscriptions. I have friends in San Francisco who subscribe to seltzer water delivery services; if you can find a market for your products at a retail location, you might be able to find people wiling to pre-pay for a subscription.
Raising Dough covers CSA and pre-paid sales in much more detail, including tips for raising money for your business by selling pre-paid subscriptions, gift certificates, and stored-value cards. I give advice for avoiding potential pitfalls — from losing track of a customer’s pre-paid balance, to facing a financial crunch when all your customers on day one pay with gift cards instead of cash — and alert you to a few laws that you need to keep in mind. The book also has chapters covering a wide range of community supported fundraising models, from crowdfunding online to direct public offerings.
If you don’t want to wait for the book, or if you’d rather learn more about these options in person, I will be covering many of these topics in the upcoming Financial Permaculture & Local Business Summit in Miami, January 21-25. If you would like to attend, please let me know so I can arrange a discount for you!