The Business of Starting a Small Farm

These days small American farms are struggling to survive. Corporate factory farms are becoming more and more prevalent, driving down prices and making farming more expensive for the little man. Government subsidies are giving to these larger factory farms making it easier for them to thrive while small farms are barely etching out a living. What is a small farmer supposed to do? Big agriculture, farm subsidies, and ‘low price leaders’ make it hard for small farmers to compete.

Getting Started

You need to be part farmer, part business person to be successful. But, it is possible. Before you start considering Western AgCredit farm loans, you need to make sure you are prepared to run a small, independent farm. Start by researching the regulations and market in your area and what expenses you can expect. The details are important. Don’t quit your day job until you have a plan. Put some money away in savings for seasons that don’t go well.

  •       Regulations: When it comes to selling food, regulations can be stringent. Are you selling milk or eggs? Are you planning on selling meat at the local farmers’ market? Do you need a business license? Are you planning on growing a pumpkin patch and inviting the public to visit the farm? These are all important questions that you need to know the answers to before you get started. The laws and regulations that pertain to these endeavors differ for every state. A good place to start is with a phone call to the local Health Department. They can provide you with a copy of rules and regulations. Extension Offices and Farm Bureaus are a great resource as well.
  •       Planning: Running a farm, even a small one, is a business. You need to treat it as such. Develop a business plan This should include short term goals, long term goals, startup costs, expected outcomes, and even a mission statement. Make sure your goals are specific and not arbitrary like making a certain dollar amount in your first year. Also, be realistic. Goals help you maintain focus. They should be specific, measurable, attainable, and time limited.

Your short-term goals should be very specific. They may even include a date of completion. You might list capital investments like buildings, fencing, breeding stock, etc. along with time frames for their completion. Developing and implementing marketing strategies should make the list.

Long term goals capture the strategic direction your business is taking. They take into account the mission statement, vision, age of owners, and disposition of the farm (will to children, sell, etc.). Sustainability might be part of your vision. This will determine how you make certain decisions.

Consider any restraints on these goals. These include your health, financial state, market trends, and competition. It is just as important to think about things that might prevent you from succeeding as it is to brainstorm ideas for success. Determine how you will deal with any roadblocks.

  •       Location and Client: Make sure you have a customer base before you settle on a location for your farm or invest in a certain product. It is easy to get excited about farming and forget to make sure you have a market in your area. If you live in a poor community, income levels might not support high-priced organic produce made available directly to consumers. Small farm products come at a premium. You want customers interested in a superior product, fresh produce they can’t find in the grocery store.

Visit farmers’ markets in your area. See what people are interested in and are willing to pay for. Is their priority local produce or price? Approach small, local restaurants and see if they are interested in buying fresh, local produce. If you don’t have a market in your area, you should rethink your plan.

  •       Startup Costs: How high these initial costs will depend on where you stand and the direction you wish to go. If you are currently living in the city, your startup costs include the purchase of suitable land. Make a list of your expected expenditures. Pad this amount. Most projects cost more than anticipated. This requires research. Take a trip down to the feed store and hardware store. Take note of prices. Research the cost of seeds. Assume that these prices will go up by the time you get started.

This is a good time to start considering loans and grants. Only take out what you actually need. Farming is a difficult business. If your farming endeavors fall flat, you don’t want to be steeped in debt. Start small and only borrow what you absolutely have to.

Diversify

Diversification is the best way to thrive as a small farmer. That way, if one crop fails, you have other resources to fall back on. Plan to have more than one product to sell. This is especially true for long term projects. If your dream is to start an orchard or raise beef cattle, it might take several years before you have a product ready for market. You need another source of income in the meantime. Here are some ideas of ways to diversify and pad your income.

  •       Try new ideas.  Don’t be afraid to think outside the box. You might be able to add a pumpkin patch or lease hunting rights. If your land is wooded, consider selling firewood. New ideas can come from a lot of places. Read farming magazines. Listen to people in your community. Be aware of the desires of your current customers.
  •       Provide services. Farming doesn’t always have to be about products. If your farm is setup for it, you might be able to provide farming lessons. Schools are always looking for fun field trip ideas. Do talks on sustainable farming.
  •       Niche markets.  Experiment with niche markets. They can be very profitable. Just be aware that your customer base might be small. Avoid any get rich quick schemes. Find ways to capitalize on these smaller markets and enhance your current operation.

Starting a small farm is a big endeavor. Many farms are struggling to compete with subsidized corporate farms. That doesn’t mean it isn’t possible. Put the time into planning and determining your market. Get your finances squared away. Hope for the best, but plan for the worst.

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