With the high cost of everything these days you may be thinking, “How do I start a profitable farm or ranch Business without going broke?” “Is it too late to start?” “Will you be able to make money?” Let’s get you started the right way.
Something is calling you to start a farm or ranch business. You think about it all the time. The ideas come to you in the middle of the night. You know you could make this work. The only thing holding you back is fear of failure.
With the rising costs of livestock, seeds, fertilizer, equipment, insurance, and an ongoing list of other expenses, you don’t want to make a mistake.
Let’s go through some steps to ease your mind and get you into running your own profitable farm or ranch.
Start with a Business Plan that Guarantees Profitability
Every single income idea you have needs to hit the paper.
What I mean is that your business will not meet your expectations of growth and profitability if it lives in your head. You need to write everything down in a business plan.
Take some time and get serious about each of these sections. If you skip out on the homework, you won’t have the whole picture. This will leave you with gaps and questions. You will be dealing with a significant investment ahead, and you want to make sure you start in a profitable direction:
Know Your Costs Before You Invest
In addition to your list of income ideas, it’s time to research your costs. Here are a few sections to think about:
The Seven Costs Categories of a Profitable Farm or Ranch
In the same way, I have a separate list of seven main categories:
1) The Business—What will you need to set up your business? A license, legal formation, insurance, software, bookkeeper, CPA, and bank accounts.
2) The Enviornment—Where will your product live and grow, and what facilities will you need to make this happen?
3) The Product—Herd, plants, seeds, equipment if offering custom services.
4) The Supplements—Feed for livestock, fertilizer, and weed control for plants or crops.
5) The Hires—Veterinarians, day workers, commissioned order buyers, social media marketers, and any other expert you need that your skills or time doesn’t allow you to do.
6) The Marketing—Smart business owners have multiple ways to market their products: social media, websites, podcasts, email lists, and networking.
7) The Sale—Vendor fees, sale barn costs, online sales fees, or affiliate/referrals.
Choose Profitable Revenue Streams for Your Farm or Ranch
Your business is coming to light!
Now, it’s time to choose which revenue stream will be the best bet for profit.
But how do you decide? Unfortunately, there’s no one-size-fits-all business model that will ensure a profit. However, there are some key things to remember that will help you to decide:
Skills—What do you have skills for without having to learn?
Knowledge—What do you know about or can quickly obtain knowledge about?
Space—What do you have access to right now or in the near future?
Money—What do you have the money to invest in this right now that will not require a heavy financial burden?
Time—What time do you have available to make this business and your life work?
In the same way you list the rest of the parts of the business plan, list these in the same manner. You need to know what you have ready to make this plan come to life.
Set Pricing that Ensures Profit (Not Just Sales)
One of the big problems I have seen when owners try to keep a profitable business is forgetting about profit itself.
Profit is what is left after expenses and has traditionally been what is taken after expenses have been paid. However, you are in this business to be profitable, so let’s start with profit-forward thinking.
When you begin to plan your prices, there are a few things you need to remember:
Consequently, you may be shocked at what you have to charge in order to be profitable. But that’s the best part! Knowing all of this BEFORE you get started will help you to create a profitable farm or ranch business.
Remember, anyone can cash a check, but not everyone is profitable.
Cut Costs Without Sacrificing Productivity
Some of the biggest money problems start with not knowing the difference between expenses and investments. Many people want to avoid having a high tax bill, so they spend on things to prevent that.
However, savvy business owners want to be profitable. Sidestepping a high tax bill comes from thoughtful planning, not increased spending. Here are some common expense traps to avoid to stay profitable:
Treat Your Business Like a Business (Not Just a Passion)
Initially, people get into agriculture for a number of reasons. To be honest, it usually starts with a passion. Whether to make extra money, feed the family, or fill in spare time, they are ready to jump in full force. On the other hand, some know they want this as a business.
So, you’ve got to decide for yourself: is this a business or a hobby?
Trust me, you need to figure that out up front before you waste time and money in the wrong category.
Businesses make profits. Hobbies feed a passion. Both are great, but they run differently.
In contrast, I discuss two key differences with my clients: Businesses have a legal structure or the intention to have a legal structure in the future. Hobbies still have to follow income reporting but often do not get to take advantage of deductions.
Another thing to remember is that the IRS has its views as to whether you are running a business or a hobby. This is why it’s essential to keep accurate books compared to their standard definitions of a hobby and a business.
In summary, it depends on your goals for which category you fall into. This is why sketching out a business plan is so important.
Market the Smart Way (Even if You Hate Marketing)
You have learned and built so much. Let’s talk about the crucial thing that most business owners forget: Marketing.
Like it or not, no matter what you raise, grow, or produce, you are in the business of sales. Selling is cringe to many people (me included), but that is the essence of business.
I want you to remember to have multiple ways to promote your business, even if you think you’re only going to the sale barn. Many of my clients missed out on more significant profits if they had promoted their livestock on their own instead of relying on the sale barn to do it for them.
Be your own promoter no matter what you’re selling. Here are some essential ways to get your sales out there:
In short, you need to add marketing to your business plan to make profits by reaching people who don’t know you exist.
The Key to Starting a Profitable Farm or Ranch Business
As you can see, there are a lot of moving parts that go into a profitable farm or ranch. You have to be smart with the money you have. Make a clear plan of what you want. Track all of your expenses and income. Price effectively. Market effeciently. Run it like a business, and you will have a profitable farm or ranch.
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