As an apple orchard passes from father to sons, more focus on the core business is required.
Brothers Jay and Scott Schaper have a bumper crop of ideas for expanding business at Minnetonka Orchards, their family-run farm that offers both apple picking and "agritainment."
"Our problem is people have this mind-set when they hear the word orchard," Scott Schaper said. "They're thinking, 'OK, that's the week after the State Fair, from the time I get a sweatshirt on to Halloween.' Maybe we can broaden their thinking, and they will come out here in the summer or later in the fall or maybe up to Christmas."
Possibilities include adding a restaurant, winery or hard-cider-making operation, hosting more events such as weddings and corporate gatherings, and increasing sales in a larger retail space. The main obstacle, and one familiar to many small businesses, is that the Schapers don't have the cash they need to carry out all their plans.
This is the fourth year that Scott and Jay Schaper, 45 and 44, respectively, have managed the orchard northwest of Lake Minnetonka.
The brothers took over management of the orchard in 2006, three decades after their father, Lowell Schaper, started it. The now-retired military and commercial pilot bought the Minnetrista land in the early 1970s after moving his family here from California.
Revenue has grown 35 percent a year since he and his brother took over, Jay Schaper said. Sales approached $500,000 last year, and the orchard broke even. That was up from $350,000 in 2007, which was a money-loser.
Jay, the CEO, and Scott, the president, are the only year-round employees. They hire 40 to 50 people to work in the fall, some full-time but most part-time.
The orchard is open daily through Nov. 9. Admission is free on weekdays, $4 a person on Saturdays and Sundays and on Oct. 15 and 16. Children 3 and younger get in free. The cost of pick-your-own apples depends on the variety and quantity picked.
While serving up old-fashioned, unplugged good times, the Schapers are taking full advantage of today's social media tools -- Facebook, Twitter and an e-mail list and a blog on their website -- to connect with current and potential visitors.
The orchard also is available for school field trips that emphasize connections among people, technology and nature. Weekend events include a hard-cider-making demonstration, slingshot and yo-yo making and a session on canning harvested bounty. The Schaper family was recognized recently as the 2009 Hennepin County Farm Family of the Year by the University of Minnesota Extension Office.
So far, Jay and Scott Schaper have leased the orchard property, buildings and equipment from their parents. That could change soon, with the brothers expecting to close any day on a loan to buy the orchard.
In addition to taking on that debt, they also have a $200,000 line of credit they have tapped to pay for each year's operations, Jay Schaper said.
With continued revenue growth and good cash flow, they expect that within a couple of years they will no longer have to use that line of credit.
By then, profits could pay for some of their growth plans and they likely could get financing for the balance, Jay Schaper said.
As they weigh their options, they're using a financial model to help see how changing their business -- opening a coffee house or restaurant, for example, or changing the price of a peck of apples -- would affect their balance sheet and cash flow.
The spreadsheet-based tool was developed by the Schaper's business consultant, John Mikelson, a manager in the outsourcing group at LarsonAllen, an accounting, consulting and advisory firm. They also can use the tool, Mikelson said, to track results at the orchard to get numbers, for example, on what people are buying and how much they are spending.
Such tools also can help business owners get a better understanding of their cost structure, which many overlook while focusing on sales, Mikelson said.
"They weren't sure what some of those metrics were," Mikelson said. "This year they'll try to track their attendance and some orchard activities to get a better idea of what's driving the business."
'A black void'
Scott Schaper said he and his brother "were looking into a black void" as they decided whether to try their hand at running the orchard. Their father hadn't kept the kind of data they will feed into their model.
Based on some rough attendance figures and some assumptions, the brothers believed the orchard had the potential to support them and their families. So they quit their jobs to become farmers.
An engineer, Scott Schaper had designed hydraulic components for 20 years. Jay Schaper left his position as director of strategic relationships at a software company. He previously had run a concessions company and a janitorial services company. In 2003 he earned an MBA at the University of St. Thomas Opus College of Business.
Their father had started the orchard as a hobby, selling apples from a roadside stand. It became a business after he lost an airline job in the early 1980s.
The brothers have kept most of the attractions their father had, including antique-tractor hayrides, a corn maze and concessions such as cider brats and hamburgers, apple doughnuts and fresh-baked goods.
'The land kind of gets in your blood'
Recent additions include a 5,000-square-foot reception tent that seats hundreds for weddings or dinners, a bonfire pit and a ceremony gazebo.
The orchard has had 12 weddings this year, as well as a number of corporate events. The 180 employees of Olson, a Minneapolis advertising firm, were to return last week for their second annual retreat there. The orchard can accommodate everything from scavenger hunts to board games and skits under the tent.
"They couldn't be more easy to work with, Jay and Scott," said Christina Clawson, Olson's brand manager. "They have a lot of room to do a lot of different stuff, which is what we needed. This is our one day to get out of the office and burn off some energy.''
As kids, Jay and Scott didn't want to have anything to do with apples, especially after having to help plant 600 trees. But now that they have kids of their own, they realized they didn't want to lose the orchard when their parents put their land up for sale in 2006.
"I could never drive down County Road 26 if there were houses here," Scott Schaper said, a sentiment echoed by his brother. "The smartest thing my parents ever did was buy this property.
"It was on the market, so it was either this is going to work or it's going to be sold -- and we didn't want to see it sold," Jay Schaper said. "The land kind of gets in your blood."