You’ve always dreamed of being a farmer. Now, finally, you’ve found the perfect piece of land and are ready to leap into farming.
But before you do, take some time to understand the ins and outs of a new farm business. Making sure you have a realistic and workable plan in place can mean the difference between living your dream and giving it up in despair. Farming is a wonderful life, but it is also not an easy venture to profit from. Unfortunately, many passionate but naive new farmers have learned that lesson the hard way.
Thirty-five percent of new farms recorded in 1992 were not in existence in 1997 -- a failure rate largely attributed to smaller farms starting and going out of business, according to data collected by the Economic Research Service of the United States Department of Agriculture (USDA). However, there is hope. The good news is that experience and information matters. Exit rates fall as farm businesses reached five to nine years old and then fell again the older they got.
To get through those tough initial years, new farmers need to remember:
Marketing Starts from Day One
Choose High-Profit Products
Don’t Take On Too Much at Once
Don’t Start Under Capitalized
Keep Good Records
Start Marketing Your New Farm Business on Day One
Many new farmers make the mistake of thinking they will figure out who to sell their products to after they have grown them. But, in reality, they end up with perishable products, not enough buyers, and tossing away a majority of their season’s hard work.
Marketing your farm should start from day one of your new farm business. Even if you’re still perfecting what you’re growing or don’t expect to have a harvestable crop for a few years, you need to begin marketing. That might mean starting to build up a local following if you’re planning to sell your products locally. It could be establishing an online presence if you plan to ship your products. It might mean networking with chefs, local grocery stores, co-ops, and any other potential sales outlets for your farm products if you plan to sell to them.
Growing the food becomes the easy part for most farmers, especially as they get more experienced. But selling it (i.e. marketing) is a constant challenge. An abundant crop with no buyers still ends up being a financial loss.
Choose High-Profit Products for Your New Farm Business
New farmers, especially small-scale new farmers, need to focus on high-profit products to grow and market. This includes targeting a market outlet that is willing to pay higher prices.
Low-margin products or cost-conscious consumers are not the right markets for beginning farmers. Low-cost food only returns a livable profit when it is produced in scale. LOTS of scale. For new farmers, typically with limited land and access to land, scale isn’t going to work in their favor or return a profit they can live on.
Instead, focus on products that aren’t already flooding the market. That could be timing -- for instance, a vegetable farmer who only produces for the winter. Or it could be a focus on specialty markets – like high-end consumers who pay top dollar for lamb. It can also mean processing your farmer crops into value-added products, like turning strawberries into jam sold through specialty grocery stores.
Don’t Try to Grow Too Many Different Things at Once
Diversity is on the mind of many new (and experienced) farmers these days — both diversity of crops and diversity of income streams.
In general, having diversity on your farm is a good goal. But new, beginning farmers often fail because they try to do too much at once.
It takes time to perfect a new crop and if you’re time and financial resources are stretched too thin, you won’t be able to focus as needed. In addition, adding diversity into rotations can change your crops in ways you might not have anticipated. Ideally, in positive ways, but it might take some adjustments before you get there.
For instance, a pasture pig farmer might decide a good diversification for their soil health and finances is adding turkeys. Only to discover that their pigs kill and eat their turkeys! It doesn’t mean that pigs and turkeys won’t work together, but the farmer will need to appropriately set up fencing and separate rotations, an expense and trouble they likely didn’t plan for.
Go slow with your farm and perfect what you do before adding something new. Then adjust and add as you can. Diversity will come with maturity.
Don’t Start Your Farm Off Under-Capitalized
Undoubtedly, your farm will cost you more than you had planned and will take longer to be profitable than you planned. Consider this a given.
New farmers often start under-capitalized, assuming they will make a profit in their early years. Or, they don’t fully comprehend that profit in farming is usually limited to short periods in the year when they have a harvest. For the rest of the year, they will most likely be working with negative cash flow. Starting a successful new farm with capital will help you survive the rough patches that are bound to come.
New farmers must be adequately capitalized to survive those early years. After all, the power bill still needs to be paid every month, even if you won’t turn a profit until September! Alternatives for low-interest farm credit include special loan programs, like the Farm Services Agency Beginning Farmers and Ranchers Loans.
Often we see farmers, or their spouses, having an off-farm job that can pay for the everyday bills while the farm gets established. This doesn't mean that you aren't a "real" farmer. It means that you are working towards your goal of having 2 (or more) full-time farm employees on your farm.
Some farmers may have saved enough money to cover five years’ worth of living and farm expenses, but it is often smarter financially to use a low-interest farm loan than drawing down all your savings. This will vary for each person depending on their financial risk comfort level.
As a general rule, it's a great idea to have some knowledge of the foundations of business as you get started with your farm. This starts with a business plan to help you as you grow. This way you know how you will support your growing farm as well as the needs of your family. Both are important to plan for as you start your new farm.
Keep Good Records for Your Farm Business
A final component known to make or break a beginning farm (big or small) is failing to keep good records or not keeping records at all!
One component is keeping records for tax time. While keeping good records makes tax time a breeze, those records can do so much more for your business. Good records help new farmers make informed decisions about their farm business. This is vital to any business.
One important component to starting a successful new farm is farm record-keeping. It can point out where you’re losing profit that might not have occurred to you.
Then, once you know the problems, you can work on solutions. For example, maybe you’ve been paying too much for feed for your new chicken farm. But, you can save money if you invest in your on-farm mill and buy whole grains from a local farmer.
Records can also show trends and areas of your business where you can grow. For example, maybe the chickens weren’t very profitable for you, but the turkeys you raised were. Or perhaps you need better records of crop planning schedules because you missed out on crucial planting opportunities during busy times. Maybe you need a better way to keep on top of your inventory management so you don’t end up buying supplies you don’t need. Or, you are desperate for a more streamlined way to communicate with your employees and give work orders. All of these reasons make record-keeping vital to your business. Record-keeping is key to a successful farm business, especially a new one!
For more help setting up your new business — including organizing all your records and marketing efforts — reach out to Farmbrite about our complete farm software explicitly designed for small, medium-sized, and beginning farmers and ranchers of all types.
We understand this dream and wish you much success with your new farm. We believe in this so much that we have a new farmer discount that saves you 75% off the first year and 25% off forever after that just for new farmers. Apply here!
Thanks for reading!
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