Where do I start? Who do I talk to about it? Are there people out there who can help me realize my dream? What’s the first step?
These are all questions that go through the minds of people who want to live on a farm. Granted, living on a farm and being a farmer are two very different things. Farmers are very specific. Farmers are business owners. In order to be considered a farmer the USDA has guidelines for the amount of revenue you must bring in. You qualify to be a farmer by the work that you do and the product that you sell. Buying a farm doesn’t make you a farmer. Selling significant amounts of agricultural product makes you a farmer.
A good test to see if you should be a farmer is exactly that, a test. Pick up any book on starting your own business and there’s generally a quick quiz in the beginning to help you ascertain if you have what it takes to run your own business. The questions are generally about your comfort with risk, the money you have in savings, your experience with running a business generally, and your experience in the field specifically. Should you ace this evaluation of your personality and be deemed by the author as fit to start then you should begin the painful process of business planning.
Painful? If the word concerns you perhaps the answers you gave on your exam were stretching the truth of your compatibility with business. Yes, the planning process is painful. You will start and stop. You will get discouraged and frustrated. You will come to the conclusion that you’re not cut out for ‘this’ and quit. You’ll pick it back up again, newly inspired by some recent event, and finish it out. And then you will be proud.
I recommend taking a business planning class. Books are wonderful and certainly let you know what you will be facing, but there’s nothing quite like going through the process with an experienced teacher and a room full of individuals just like yourself. Should you can find a class that zeroes in on the field of your choice, namely farming in this case, even better.
A good business has three parts. One, an individual experienced in running a business. Two, a second person extremely qualified to do the field specific work. As an example, a good farm business will have one person who has farm experience, preferably hands on from an internship, apprenticeship, technical institute, or working as a farm hand or manager. It will have someone else with business experience, perhaps from a job as a business manager, entrepreneur from another field, or college education. Third, two words: working capital. Most small businesses go under when there’s a cash flow crisis. Having enough money to live on and invest in the business is critical. These elements are the triumvirate of good business. Only when these forces combine can a business succeed. Should any one element be weak or missing, the business will fail.
Once the business plan is complete you can go out and beg for money! As this is the third point on the triangle of success it cannot be ignored or given less attention than it deserves. All the while you are looking for investors; you need to be looking for farmland. Check your real estate listings, your state’s Farm Link program, agricultural organizations, county auditor’s office, and drive around in the area you want your farm business to be located. Asking for money and finding farmland are similar tasks. You have to get out there and talk to people!
As you look for land, be very specific about your criteria. Just because a beautiful farm is available at a great price doesn’t make it the right farm for your business. Having lots of barns and other out buildings is not necessarily relevant for a produce farmer but would be crucial to someone looking to start an animal operation. Similarly, a farm located out in a rural area will be cheaper but if you intend to have people pick up their weekly CSA shares at your farm this might not be realistic for your customers. Be sure to get a soil test and check the zoning regulations for whatever property is of interest. Also, access to water is critical to livestock and crops so be sure it is available.
Most beginning farmers want to purchase an existing farm and live there. They want to wake up to cock-a-doodle-do, drink lemonade on the front porch rocker, drive a tractor, and catch fire flies in mason jars on summer nights. This is a beautiful picture but not a good element to include when making a business decision. Should you feel the need to actually own a farmstead you will need to separate the purchase of the home and the business. Many people feel that farms are too expensive but they forget that when you purchase a farm you are buying a home and a place of business. Of course it’s going to cost more.
A better choice for you might be to rent land. Very rarely do businesses purchase the buildings in which they are housed. Your local coffee shop, grocery store, and retail clothing establishment rent space in existing buildings. It would cost too much and add too much debt load to the business to start out buying an office building or store front. As mentioned before, working capital is critical and there is little logic in taking on a large loan for a small business owner. It makes better sense to begin by leasing in order to keep costs low and keep the business viable.
See next quarter’s newsletter for an article on specific lease and purchase options for new farmers.