posted 8 years ago
Installment 4
So, let's say you already have your land and you too have found that you need to change directions as far as what your goals used to be for your piece of the earth mother. Perhaps, like us, you have found that to live a nice life after retirement you need to find a way to make a little money from your farm, or perhaps you want to make all your money from your farm. Since making this decision, your big question suddenly is; how do I do this?
Setting up a business is done in steps, just like building a farm, house or anything else that is built. First step is to find out what your market is and which part of that market has a gap that you can fill. This is basic research for all businesses and failure to do this first, means lots of extra work or down the road failure (it is the primary reason that so many start up businesses fail in their first years).
In our case, which I will use as an example, we know there are 5 high end restaurants In the Capitol city of Little Rock. By calling and making an appointment with each of the Executive Chefs, we will be able to ask what they would want to use that they can't get now. This gives you the identity of the items you would want to produce to sell to them and you can find out their estimate of how much of each item they would want each week. Multiply those figures for each chef and add them up and you now know exactly what your production numbers have to be to be the filler of those orders. This is step one, you now know your market, the quantities needed and frequency of deliveries needed. This step is the same regardless of type of produce; vegetables (full grown or micro), pork, beef, lamb/mutton, etc.
You have the quantities so you can calculate, land mass needed, water needed, etc., to be able to fill those orders. You can also determine if you need high houses/ green houses and how many of them will be required. From this information you can build a business plan, build a delivery plan and calculate total expected costs and revenues. Those figures will show if this plan is economically feasible and don't be afraid to tell yourself the truth. If the figures aren't good, then don't jump in, if the figures are marginally good, decide if you really want to jump into this venue. For us we have some choices that will work pretty well.
1.) we can go with our Heritage Guinea Hogs as long as we can meet the demand of 4 hogs per week, per chef. This really isn't an option for us at this time, we can build up to those numbers but that means we have to be present every day, month after month, this option isn't going to fit our new goal of being able to travel some. Our decision, this is out, at least for the next few years.
2.) The chefs would love to have a steady supply of fresh micro greens as well as fresh fully grown and baby vegetables. The micro greens will require either one large high house or one large green house, growing lights, and probably at least one hired worker to help us with seeding, growing, harvesting, packing. This is very doable for us but it means we have to build the growing house, buy and set up the lights and expect a higher electric bill every month along with heating costs in the winter months. This option is still under evaluation.
3.) The chefs would also like seasonable fruit items like Figs, Arkansas Black Apples, Pears and Plums.
This means we could build our land into strips of trees and alleys, the alleys can grow vegetable products and the tree strips will grow the fruits, little maintenance will be needed, the alleys can also build the soil even better than we have it now along with retaining more water in the soil, which the trees will want to have as well as the vegetable crops. We might need some seasonal helpers which we can find at our high school. We already have the beginnings of this avenue established and it can be scaled up pretty quickly to meet the chef's needs. The down side is it isn't a year round income supplier.
4.) We can go into chicken, duck, guinea fowl raising and provide eggs from the pasture raised chickens and ducks and we can provide guinea fowl meat as well. This option will take one year to have the numbers needed to provide all of these products in the quantities required and still have numbers needed to continue along without having to buy more stock.
5.) Our fifth option is to just raise everything for our own needs plus some extra that we can sell ourselves at some farmer's markets. (we have a good friend with a country store that will buy the surplus as long as we can provide the quantity he requires to consider us a producer.
As you can see, we have done some homework on ways to fulfill our desires and still have a working farm that produces income.
There is also the option of setting up for more production of different items as the years go by which would increase probable income year by year.
It will be work but that is the nature of real world business and farming is very much a business.
From my example above, there is a lot to consider and a lot of preparation required to start a business and insure that you don't go broke right off the bat.
The more you prepare, remain objective, willing to believe the figures and not just go into any venture without knowing all the risks, pratfalls, and other curve balls that will be thrown at you.
The more likely you are to set yourself up for success instead of diving into failure.
If you are selling something, you will always be looking for other people to buy your product (s) because Murphy's laws always come into play.
Even if you start out a success, the moment you decide you can slack off just a little bit, is the moment you have headed towards failure.
I have seen it happen many times.
A business starts up, goes along pretty well, building up customers, money starts coming in,
and then the person who worked so hard to get to this point decides they can take some extra salary or they decide they need to take an expensive vacation because they have earned a big reward,
even though they are still considered a start up business by the rest of the business world (5 years).
Poof, they suddenly are scrambling to keep their business alive, They start to flounder since they didn't wait till they were well established in their market,
with enough good employees that they were able to take some well earned time for themselves and their market share went to others.
This happens very rapidly in the restaurant business, perhaps more so than any other venue.
It happens to many farmers too.
They are chugging along, seeing their books go into the black and suddenly they want a new car, new tractor, new combine and then the next crop is not the bumper crop they thought they would have and they find that they can't meet their financial obligations.
The new car is repossessed, maybe even that tractor and combine then their house/farm mortgage goes into being late and suddenly, that is in receivership and being sold at auction.
In my area, just this year, 4 such occurrences have happened to people who believed they had it good.
Rule One of business bit them in the butt and now they are not just on the skids but out on the streets.
I am not saying it can't be done, I am saying to always be prepared and get set up for that worst case scenario.
Build slowly, get out and find the buyers for your market goods, and then go find more buyers and then go find more buyers, don't contract with all of them at once, but rather know who will buy from you as you build up and are able to provide your goods to more people.
Don't go deep into debt, build a “travesty” savings account that is separate from your bank accounts and never, ever think the business till is there for you to dip into, because it isn't.
You are not the farm and the farm should not be you.
An LLC is a good, inexpensive, way to protect your personal assets.
In the real world, sole proprietor or partnership are the two worst ways to be in business, no matter what that business is.
Both keep you personally responsible for any debt the business incurs and should the business fail, they those creditors are free to come after your personal bank accounts.
That is why there are Corporations, they are separate entities and no personal assets can come into play at court time.
The steps you want to follow to build your farming business are;
Find the land, in that 100 mile radius for a farm fresh type business and buy it.
Find out what market or market niche you want to serve and determine the needs of that market.
Write out your business plan (this includes your farm layout plan) and keep several copies of it around to look at every day.
It is hard to ignore the written word, so use that to your advantage, it will keep you from deluding yourself and that is a good thing.
While there is a silver lining, it is for clouds, not for businesses.
Expect to back slide and prepare for worst case scenarios, they will happen but if your prepared for them, they won't shut you down.
Create some sort of Corporation, an LLC is the least expensive insurance you as an individual can have to protect your personal income and property.
Get into the habit of working at least 12 hours a day (that's half a day) it is your new, chosen work day.
Know you will succeed as long as you don't fool yourself with "pipe dreams", while they can be good, helping you have goals to achieve, this is the real world and it is just waiting to chew you up and spit you out.
Marketing is key to selling anything, doesn't matter what it is, it has to be sold and at a price high enough while at the same time, seeming like a good deal to those doing the buying.
Do not be afraid to ask for help, anytime, about anything. Somewhere out there in your area there are others, just like you, that are willing to offer advice from experience.
You may not know them, but they can be found by asking, at the feed store, church, farmer's markets, fairs, etc.
Be firm in your resolve to succeed and be ready and willing to do what it takes to have that success.
Always remember, nice guys can finish first, and they get more satisfaction out of it than those who cheat, lie and steal their way to first.
The trick to that is to not be suckered into not being smart first.
Spending money should be done wisely, not just to have that "latest Greatest" or "because I want it", while they can hurt personal finance, they can destroy business finance.
The best way to succeed is to not go into debt over 1/4 your lowest income year.
That way you can dig yourself out of that debt hole no matter what happens
It is easier to build a savings account than to pay of debt.
Redhawk