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Shouting Buy-back in a Room of Worm Workers |
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Written by Administrator
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Sunday, 11 September 2005 |
by S. Zorba Frankel, from our issue #29
Worm buy-backs.
Mere mention of this business arrangement stirs up thoughts and
emotions among those in the earthworm industry. Our website’s Worm
Forum
has frequently been host to (sometimes rather heated) discussions on
the topic. Simply search under “buy-back”—you’ll find plenty to read!
There are at least a thousand such worm buying contracts already
purchased in the U.S., and probably several times that number that I am
unaware of.
The Contract Arrangement
Most buy-back companies offer several different “packages,” with
differing initial investments, contract lengths and purchase prices.
Generally, a larger investment will mean a higher buy rate and a longer
contract. Here, for example, are B&B Worm Farm’s (bandbworms.com)
current packages:
Initial Contract Buy
Investmt Worms Length Rate
$10,000 100,000 3 Yrs $7.00
$15,000 150,000 4 Yrs $7.25
$20,000 200,000 5 Yrs $7.50
$30,000 500,000 6 Yrs $8.00
$40,000 1,000,000 7 Yrs $8.25
$50,000 1,500,000 7 Yrs $8.50
What do you get for your investment? A promise that your buy-back
company will buy as many of the progeny of your starter worms as you
care to sell, at a stated rate, within a certain number of years. In
general, companies also offer phone support, a written manual and a
money-back guarantee during a trial period, usually one year.
Misinformation & Exaggeration
Unfortunately, buy-backs have a history of making misleading claims
about redworm growth rates and on basic vermiculture practices. Much
information is simply not there. Facts they do give were drawn from
growers’ books and manuals of the 1950s, which were vague and
inaccurate on redworm science. Things are changing now, though. B&B
Worm Farm has purchased and received a worm grower manual and CRS has
received numerous smaller written materials from Kelly Slocum, a
recognized authority on worms, worm composting and vermiculture, and
our former co-editor (see sidebar).
Check Those Facts!
Armed with the good science found in this issue’s feature article,
potential contract buyers are in a position to check these companies on
their facts! Call their sales personnel and ask them how fast the worms
they sell you will reproduce. Ask them about feedstocks and feeding
rates. They should have learned at least the basics, from Kelly, and
should be teaching only this. This is one way to curb, and finally end,
all misinformation and exaggeration.
Burning Questions
Within the last couple of years, the buy-back-related calls we’ve
received are from people who are concerned and want to know more about
the company they’ve either purchased or are considering purchasing a
contract with. They’ve just heard from friends about the dangers of
buybacks, and want information, and to be reassured. That Worm Digest
isn’t hearing from people claiming gross mistreatment seems to reflect
a shift toward more ethical business practices. There’s still a ways to
go (see our article on pg. 20), but these companies appear to be doing
better.
A Litmus, er... Legitimacy Test Needed!
“Is the company legitimate?” is the tougher question we are often
asked. It asks whether a company follows through on its promises. (We
tell them to get grower references, and to check them.) The question
also asks if the company has significant sales of worms, other than to
new contract buyers? Does the company only sell contracts, and buy your
worms to sell new contracts, round and round, until one day the company
is shut down? Does it have significant contracts to sell worms to end
users? What a difference it would make to potential growers if they
could only check with some business agency, and get information about
the company’s projected contracts. In the absence of such an agency, we
would advise potential growers to ask to see the company’s worm and
castings contracts for the upcoming year or two. If your request is
granted, then (after signing a non-disclosure agreement, perhaps)
you’ll learn much more about their long-term viability.
Buy-back as Business Partner
One very helpful way to view the buy-back company is as a business
partner. They will be the marketing arm of your new business. If your
friend gave you a name, saying “you should make this person your
business partner, (s)he’s a whiz at marketing”, would you hire that
person, sight unseen? Certainly not. You’d want to get to know the
person, and their work history, before considering going into business
together. You’ll want to know that they will operate the business in an
ethical and wise manner.
The value of the contract, as we understand it, is just as good as the
word of those that operate the business. You trust that they are going
to buy back worms from you. The contracts may or may not be legally
binding (and we haven’t looked into this) and so you want to be sure
the business owners are integrous. Ask for references and check them!
So, get to know the company well before embarking on a business venture
together. Ask for a list of references, including current growers.
Visit several growers. Ask questions that help you get to know the
buy-back company and the vermiculture business you’re about to embark
on.
Business and Investment Means Risk
Start any small business yourself this year, and your chances of still
being in business three years later are less than 50/50. You need to be
smart and work hard and do things right to succeed. This is true of the
worm business, as well. A buy-back company’s offer to handle all
marketing sounds good, freeing you to only grow the worms, but two
risks remain: that you won’t grow worms as well or quickly as you
thought you would, and that their company may not be able to buy worms
as promised. No insurance exists for either of these possiblities.
Starting your own small business typically costs a lot of money. You
can expect it to take a number of years before profits start to pay off
the start-up loan. Growing worms is no exception. It is not a
get-rich-quick business.
Above All, Know Yourself
Before taking the plunge, know why you’re getting involved in the
contract. You may have great reasons for hiring a company to do your
marketing, leaving you to enjoy working with the worms. For Olivia
LaLonde this was exactly what she wanted (read her saga on pg. 20).
If you’re feeling any pressure to sign, simply slow down.
Let their sales team wait while you carefully consider your plan. Work
out the details of a good business plan. Attend a worm conference and
run that plan by others. This is an important business decision, and
should be looked at as closely as you would the founding of any
enterprise. Get professional help from a business consultant or adviser.
Perhaps the most reasonable advice is to start small—get some redworms, start raising them, and think “business” later!
Working To Improve Buy-back Practices
Since early 2001, Kelly Slocum has worked with two of the largest
worm buy-back companies as a consultant, and as an educator at growers
workshops. She also served for a period of time as a Board member for
one of the companies. Last October, I asked her about her involvement
with, and goals for, the companies she worked with.
WD: Tell me about the work you’ve been doing with worm buy-back companies.
KS: What I’ve been doing, with both B&B [Worm Farms] and CRS
lately, is providing a growers manual and editing materials that they
hand out to people. I spend the majority of my time answering growers’
questions via email and telephone. They’ll have questions about how to
do something, an idea of something they want to try, or a problem and
they call me and I’ll give details on their system. I’ve also been
helping B&B develop the castings end of their business, how to
produce good castings and potential end uses.
WD: Do you have an overriding goal, a direction in which you want to see them move?
KS: Well, providing accurate information would be a good start, and
both of these companies are moving in this direction rapidly. I’d like
to see them giving really good information on worm production rates and
projections for what their growers could actually expect. I’d also like
to see them develop the castings market, where there’s more potential
for growth than for worms. The same model can be used, where you now
have multiple worm growers in one area, producing worms, they could do
the same thing for castings and then sell those castings in that same
area.... There’s revenue from multiple streams from the same contract.
WD: What have these companies done to improve the information they give?
KS: Both of them have made huge leaps in improving the information that
they provide. B&B asked me earlier this summer to write a growers
manual for them, which I did... That information was accepted without
question and it’s that information that, to my knowledge, that they
give out to growers at this time. CRS has just asked me to provide them
with that same information and that same type of written material and
to edit the little small pamphlets that they hand out to people as an
initial contact. So, both companies recognize that they either had in
the past or currently have a problem with accuracy of information and
have actively taken steps to correct the problem. [Note: As of this
publication, only B&B has purchased a manual from Kelly.]
WD: Do you have any long-range wishes for these companies?
KS: In a perfect world there would be so much demand for castings and
worms, that these companies wouldn’t need a $10,000 buy-in and then to
buy the worms from their contractors. They would just put out
advertising, “Hey, we need all the worms you can grow” and they’d buy
them from anybody—there’d be no buy-in. Our industry is early enough in
its development that we don’t have that kind of demand for product yet.
So, I’d like to see perhaps a little more mainstream approach to worm
growing. I’m not necessarily opposed to the buy-back contract, provided
that there’s parity for everybody on both sides of that contract. I’d
like to see some assurance that that’s the case, somewhere down the
road.
From the website of Combined Resource Services (CRS), just as this issue goes to press:
Q. How many worms can a bin hold?
A. Since worm bins come in various sizes and shapes it would depend on
the size. But generally a bin can hold 4 to 5 lbs of worms per square
foot.
[Unfortunately, the density suggested here is just higher than that
achieved in laboratory conditions. In growers’ beds, worms will reach
densities of two to three pounds per square foot. – Ed.] |
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Last Updated ( Sunday, 02 October 2005 )
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