Selecting Alternative Enterprises for the Farm
Farm Business Management Update, August/September 2003
By Bill Whittle
Farming is a tough business. High prices and yields allow the luxury of reaping the benefits of hard work without modifying the operation. However, low prices or poor yields often cause management to search for ways to bring in extra income.
The addition of an enterprise to the farm is one way to improve the farm's financial picture, either as an add-on to the current operation or as a stand-alone enterprise. Possibilities include such varied enterprises as fruits and vegetables for farmers market or Pick-your-own (PYO), agri-entertainment such as corn mazes or farm tours, and value added processing such as cheese, wreaths, and compost. The list is limited only by one's imagination.
Unfortunately, no system that a farmer can use guarantees success of a new enterprise. New enterprises are exciting. Too often farmers feel that planning just gets in the way of making money. However, there are steps to work through to identify good and bad points of an enterprise thus strengthening the opportunity for success. These steps may help identify dead-ends before the end has no turn-around available.
Step 1. Determine your goals for an alternative enterprise. Are you looking for a little extra income or are you looking for a major change in direction? How much money? What kind of lifestyle? How much time to you want to devote to the new enterprise?
Step 2. Brainstorm with all concerned parties. Where does your interest lie? What do you want to do? What can you do? Include both family and non-family employees when determining a new direction. Put all ideas on the table for discussion. Dissect the most promising. When the people who work directly with the enterprise have the opportunity to buy into a new program, the chance of success is greater. One disenfranchised person can kill an otherwise good idea. The brainstorming session is a good time to bring in outside advisors such as lenders, valued friends, and Extension Agents to get a broader perspective.
Step 3. Not every good idea is worth pursuing. How does the new enterprise fit into the current farming operation? Develop both financial budgets, a labor budget, and a time-line budget. You may have selected a solid enterprise; however, if un-reconcilable conflicts occur with the current operation, success may elude you.
Step 4. How will the product be marketed? No weekly fish auction or elevator will take raspberries. Alternative enterprises generally require high touch marketing with the manager spending as much time on marketing as production. Enterprises such as PYOs or agri-entertainment require a high level of interaction with the general public. Working with the public may sound like a disincentive to some farmers, but the public generally is willing to pay for the things it wants.
Step 5. Do you like working with people? If you had rather be around cows than people, be honest with yourself and search for the enterprise that works to your strengths.
Step 6. Visit farms that have incorporated the enterprise. Learn from their mistakes and successes. Farmers are often willing to talk about their operation, but you may be wiser to look outside your area so that you will not be considered competition. Determine if the ideas garnered from your visits will work in your locality. Will your locality support your operation or has the area been flooded with your "new" idea?
Step 7. Plan thoroughly. These steps are shown in a linear format but in practice they are circular with answers begatting new questions. Planning requires time and should be started well in advance of a potential start date. Proper planning may be the difference between a Money Tree and a Money Pit, but at some point, you need to pull the trigger to proceed or shelve the idea.
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