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Good morning! It's Tuesday, November 7th. Today’s post looks at Kapco Futures, a company that’s seen 1,569% revenue growth in the last three years from providing modern finance tools to ranchers!

THE FEATURE

From Commodity Broker to Revolutionizing the Livestock Industry

Cattle farming has been a robust contributor to the American economy since the 1850s. 

While technological innovations have altered livestock harvesting methods, cattle farmers still purchase and sell cattle basically the same way they have been for centuries. 

Jeff Kaprelian is looking to change that with his company Kapco Futures, which landed on this year’s Inc. 5000 list with millions in revenue and 1,569% revenue growth over the last three years!

So, What’s the Business?

Before starting Kapco Futures, Kaprelian was entrenched in the finance industry, having worked as a commodity broker and director of operations for asset management firms. However, it was this detachment from cattle farming that gave him a bird’s eye view of the problems the industry faces. 

Like any other business or industry, ranchers struggle to maintain profitability in the face of price swings and market volatility. However, they possess none of the data-driven tools to predict market changes and alter course. 

This became apparent to Kaprelian when he went to his first cattle auction, where ranchers purchased livestock purely based on appearances– akin to how people buy used cars. But with his financial background, Kaprelian didn’t see cows; he saw data points. 

Kapco Futures is modernizing livestock farming by providing its clients with a deep analysis of their production costs and models for the expected value of cattle futures. Though this is new to the industry, ranchers have kept detailed records of cattle breeds and purchase prices as far back as the 1950s, which provides endless data points for Kapco Futures to utilize. 

While the business is seen as revolutionary to ranchers, Kaprelian believes that the basis of Kapco Futures is “astoundingly basic math.” As it turns out, creating personalized cost-benefit analysis for ranchers is extremely easy– Kapco Futures is just the first to do it. 

For instance, the feed costs in Illinois are lower because that’s where the corn is grown, but it takes longer for cattle to gain weight due to harsh winters. On the other hand, feed costs are higher in Texas, but mild winters allow cattle to gain weight faster, resulting in a faster harvest time. Kapco Futures factors all of this into its business models and provides ranchers with actionable strategies to maximize profit.

How They Win: Knowing Your Clientele

When he started his company, Kaprelian struggled to win over ranchers. In an industry composed of blue-collar workers whose relationships are based on mutual respect and livestock knowledge, Kaprelian’s commodity broker background didn’t get him very far. 

So, to build credibility with his clientele, he became a rancher. With the help of one of his first clients, he purchased 40 head of cattle. It was through this experience that he got a personal understanding of the costs of ranching and the importance of keeping feed costs under control. 

Today, Kaprelian’s herd has grown to 750 head of cattle, providing him with a level of legitimacy among ranchers that makes acquiring new customers significantly easier.

Key Observation: “Riches Are in the Niches”

Unfortunately, Kapco Futures is a private company, and we know little about the company's financials aside from millions in revenue and 1,569% growth over the last three years. 

However, landing on the Inc. 5000 list is impressive, considering that Kaprelian’s target market is fewer than 10,000 people!

Typical businesses don’t look to target such small markets, but Kaprelian believes that “riches are in the niches”— as long as you can dominate them. Kapco Futures’ average customer has about 3,500 head of cattle, and ranchers generate enormous amounts of revenue in addition to the enormous debt and risk they take on. 

Kaprelian’s success shows that a viable business can be created by providing a solution to a very small group of people. With that being said, there has to be sizable revenue/income within that group.

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