If you're keen on venturing into the farm business, there's no better time than the present to get the ball rolling. You can become a part of millions of small farms operating in the United States. According to the U.S. Department of Agriculture (USDA), up to 98% of farming operations in the country are family businesses. These small-scale farmers typically gross roughly $350,000 annually.
This startup farm guide explains the steps necessary to set up your farm and start operating.
Educate Yourself About Running a Successful Farm
Many regional farming organizations, including the USDA, offer several agriculture training programs from which to choose. Alternatively, you can enroll in an agribusiness degree program. This approach can help increase your know-how, allowing you to maximize your venture's profitability.
How to Plan Your Farming Business
To start farming on solid footing, perform comprehensive business planning. The process focuses on various aspects of farming, not just the numbers. During this phase, write down your farming business ideas on paper. Outline the planting and harvesting processes, conduct financial assessments, formulate a marketing strategy, and decide on your business structure.
Write a Business Plan
In your plan, delve into cost estimates for starting and running the farm operation. You should determine expenses for equipment, land, and agricultural business inputs. This assessment helps you stay organized and avoid overspending.
Your farm business plan should also cover how much time you're willing to commit to the profession. You should indicate whether you'll work part time or full time at the farm. Many beginning farmers fund the cost of living using personal savings until the farming operation turns a profit, which can take several months or longer.
Choose the Ideal Agricultural Products
Your choice of agricultural products will determine the profitability of your business. Additionally, it will determine the type of equipment you will need for your small farm business. However, your farm's location will also play a part in the choice of products. The local climate, soil fertility, and other technical factors will enable or hamper your ability to grow certain crops or raise particular animals.
Examples of agricultural niches to consider include:
- Bonsai farms
- Dairy and livestock
- Fish farming
Select a Target Market
Conduct extensive market research to acquaint yourself with current conditions. As you gain insights, you can identify the ideal target market for your products. When handled correctly, this process boosts your farm's growth potential.
To achieve the desired results, ask yourself the following questions:
- Which target audience is willing to buy products from your new farm?
- How much is this customer group willing to pay for your agricultural products?
- Where can your customer base find the products?
Provide a realistic assessment of your findings and iron out any potential hurdles to your overall marketing plan. This is also a good place to highlight your new business's strengths.
Assess Startup and Operating Costs
Small farmers typically require a substantial amount of money to kick-start operations. You need to determine specific requirements to give your own farm the best chance of success.
Land acquisition will generally account for the highest cost of your farming operation. Farming equipment is another essential cost item to consider during the planning phase. Proper planning eliminates the risk of making faulty purchasing decisions. For instance, investing in a poor-quality tractor or the wrong irrigation system can undermine your ability to operate efficiently.
Setting Up Your New Business
Successful farms comply with federal, state, and local regulations governing specific business activities. Although farmers' journeys differ, you still need to register your farming business, obtain tax IDs, take out insurance, request permits, and choose a unique farm name.
Register Your Agribusiness
Many new farmers wonder whether it's necessary to register a farming enterprise with the state government. Registration is beneficial in many ways, including gaining access to business loans and attracting investors. Depending on your chosen business structure, though, you can also benefit from the separation between personal assets and the farming business.
As for business structure options, a limited liability company (LLC) is a viable option that allows you to operate as a single- or multi-owner business. The structure also comes with flexible tax reporting benefits. Corporation and partnership structures are also viable options, depending on your long-term business plans.
A sole proprietorship doesn't create a corporate veil and can expose personal assets during any farm-related lawsuits. On the upside, a proprietorship can save you time and money since you'll be able to commence farming activities without registering the business.
Determine Licensing and Permit Requirements
To comply with business regulations, you need to ascertain licensing and permit requirements irrespective of whether you run a family farm. You can apply for the required permits after registering your venture.
Examples of permit and licensing requirements that may apply to your agribusiness include:
- Environmental permits
- Health and safety licenses
- Import and export permits (for animal products, plants, and biologics)
- Permits to transport animals and other regulated agricultural products
Open a Farming Business Bank Account
As you grow produce and deliver it to farmers markets or grocers, you need a dedicated agribusiness bank account to handle the cash flow. The documents required to open the account depend on your chosen business structure. Thus, you can either use a Social Security number (SSN) or an employer identification number (EIN). However, it's necessary to confirm the exact requirements with your bank.
Once you activate the account, you can work toward applying for a credit card. Over time, you can build a credit history for the farm business so you can borrow from various financial institutions. Access to loans makes it easier to invest in specialized farming equipment and grow the enterprise.
Skynova offers accounting software that eliminates the need to rely on books and cumbersome spreadsheets. Digital products are easy to use even without accounting experience. You can record cash flow using the double-entry accounting method. Additionally, Skynova's software simplifies receipt upload, expense tracking, tax reporting, and generating financial statements.
Determine Your Tax Requirements
The Internal Revenue Service (IRS) classifies farming enterprises as entities that report revenue using Schedule F (Form 1040). If your hobby farm sells produce at the local market, you should file tax returns like other growers.
The tax rules stipulate that if two-thirds of personal gross income comes from farming operations, you must pay taxes. This requirement applies to your income for the current or previous tax year. The IRS expects you to make the payment by the 15th of the month after the tax year closes.
Promote Your Farming Business
Sales channels for agricultural produce include farmers markets, festivals, farm open houses, and seminars. Digital platforms provide an additional channel to showcase products, so it's important to create a farm enterprise website. Many small-scale farmers also sell directly to consumers or offer a community-supported agriculture (CSA) program to boost their overall sales.
Create Your Farm Enterprise Website
Your website and social media presence will play an essential role in your farm marketing strategy. Digital platforms provide a cost-effective way to spread the word about your agricultural products.
Also, consider setting up a Google My Business page to target local customers. Some shop owners and other customers search for suppliers of fresh produce via the internet. An online presence makes it easier to get discovered and boost sales with bulk orders. In the end, your hard work will likely pay off with increased farm revenue.
Create a Logo for Your Farm Business
A farm logo is a key branding element that projects a professional image to customers. Your chosen design can be simple or intricate to match your farm branding strategy. Customers will find it easier to distinguish your business from competitors and keep supporting you.
The ideal design resonates with customers' perception of your business. For instance, a logo featuring livestock helps customers associate your enterprise with specific animal products, such as meat. Complement the design with a suitable color scheme.
Additional Ways to Boost Farm Sales
Joining farmers associations is a practical way to drum up business for your venture. Membership allows you to connect with potential buyers looking for specific agricultural products. Likewise, advertising in industry magazines can be a channel to promote your business. Additional options include attending farm-related events and online advertising.
Operating Your Farm
Managing your finances is a major part of running a successful farming venture. You can streamline accounting processes without outsourcing the tasks by relying on Skynova's business solutions. We offer wide-ranging templates that simplify billing, invoicing, and other tasks.
Our online accounting software also allows you to record and back up transactions at the touch of a button. By taking advantage of our services, you'll free up time to focus on core farming and business management activities.
Streamline Your Operations With Skynova
Turning your hobby into a profitable agribusiness venture starts with proper planning. Your plan should cover various steps covered in this guide, such as choosing a farm business structure and formulating a marketing strategy. Finding the right digital solutions to streamline your accounting processes is another critical aspect that makes a difference in your day-to-day operations.
See how Skynova's templates and business software can help make your farming business a success today.