Build a Business on Your Farm

by Cris Carusi

Someone once said that farming is the only business where you buy retail, sell wholesale, and pay the transportation both ways.

While most people would agree that this is bad business, for most farmers it is reality. With input and transportation costs rising more rapidly than commodity prices, it's tough to make ends meet on the family farm these days.

In 1910, farmers got about 40 cents of the consumers food dollar. In 1992, the farmers share was down to 9 cents and dropping. In other words, says ag economist John Ikerd, even if farmers donated their corn to the processors, you probably wouldn’t notice any change in the price of cornflakes. Most of the food dollar is spent on marketing.

Rather than view this trend as an impossible problem, more and more farmers use it as an opportunity. They shift marketing profits into their own pockets by growing, processing and selling their products directly to consumers, restaurants, retail stores and other unique markets. Some even open their farms to tourists for vacations and hunting. To succeed, these entrepreneurs must manage their farms like businesses and grow a great product for their customers.

Farming skills are assets that can be used to start all kinds of businesses. No idea is too crazy, as long as you're willing to do the research and put in the time and energy it takes to make it work.

Muriel Barrett, along with her mother, brother, and children, were faced with the question of how to make their conventional grain and livestock farm more profitable. They decided to develop several high-value enterprises on their Sutherland farm and to rent out their crop and pasture ground.

The mainstay of their operation is 10,000 broiler chickens which they raise, butcher, and sell directly to customers using Joel Salatin’s model of pastured poultry production and marketing. They have a sporting clays range where hunters can improve their shooting skills and offer hunting vacations on their farm. The family is in the process of refurbishing a cabin which they plan to use for bed and breakfast-style farm vacations.

Muriel notes that having a small business on the farm is not a new idea. "Having a second business on the farm dates back to the earliest days of settlement," she observed. "Every farm wife had eggs, chickens, and a dairy cow which provided household income. This idea still fits now. It doesn’t have to be chickens or milk."

Muriel says that her business is profitable. She is currently paying off her initial investment in poultry pens and processing equipment, but in the near future she will keep most of her profits. She charged $1.35/lb for her dressed broilers last year and she plans to raise the price to $1.50/lb next year. One big advantage of direct marketing is that the seller gets to set a price that covers production costs plus a fair wage and benefits.

Starting a small business can benefit rural communities as well as individual farm families. According to Phil Menke, business specialist with the Rural Enterprise Assistance Project (REAP), "Small business owners tend to have a stake in the community. They have their roots there, and they care what happens to the community." Menke said that a higher percentage of the profits generated by a local business stays in rural communities, compared to an outside business like McDonalds.

Menke points out that profitable businesses on family farms create new opportunities, which in turn can encourage young people to come back to the farm and increase the population of rural communities.

Kevin and Charuth Loth grow, harvest, and process salad mix and vegetables on their farm in southwest Lincoln. They sell their produce at farmers’ markets and to stores and restaurants. One reason behind the Loths’ decision to start a business on their farm was that Charuth wanted to work at home with her kids rather than work in town.

"This kind of work makes sense for a family," commented Charuth. "I want to be with my kids while they’re young. We decided that I should work on-farm with the kids rather than work off-farm. This is a wonderful way for women, and dads, to be with their kids and have a small business at the same time."

Muriel says that government bureaucracy has been her biggest challenge in starting her business. After consulting with USDA and the state health board, she invested $35,000 in a poultry processing building and equipment which met USDA inspection standards. She later learned that Nebraska law allows farmers to raise, process and sell up to 20,000 chickens each year without USDA inspection.

"Learning to run the farm as a business has been a challenge," added Muriel. "One of the best things we did was take the Nebraska EDGE business course. We developed a business plan for the entire farm. The plan has been changed and modified over the years, but the skills we developed in writing that plan have helped us."

EDGE is a community-based entrepreneurial training program offered through the University of Nebraska. The program helps students complete a business plan and provides networking opportunities. Since 1993, EDGE has held 32 small business training courses in 19 communities.

The REAP program offered through the Center for Rural Affairs is another resource for small business owners. 33 REAP associations in Nebraska offer education, small loans, networking opportunities and technical assistance to their members.

Although running a small business is a lot of work, both Muriel and Charuth love working outdoors, and both value the opportunity to work with their families and kids.

"It’s a wonderful life," says Charuth. "Sometimes my stress level gets too high and I have to remind myself that I love it. But then I go outside, see the beautiful scenery, hear the birds, and see the kids playing, and I remember why I love doing this."

For more information about small business assistance programs, contact:
Rural Enterprise Assistance Project (REAP), Center for Rural Affairs, 402-846-5428; www.cfra.org
Marilyn Schlake, Nebraska EDGE Program, 1-800-328-2851; ianrwww.unl.edu/ianr/agecon/rural

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