Guide to Starting a New Farm for Beginning Farmers

March 21, 2022

Man and wife with daughter carrying vegetables

If you feel your best waking up at the crack of dawn, putting on your work boots, and caring for your livestock and crops, starting a farm from scratch can set you up for a rewarding life doing work you love. Starting a new farm takes tons of research, financing, and ambition to run a successful farm business, but you can also start small and grow your own food to build your knowledge..

Our small farm guide for beginning farmers provides you with an introduction to jump-start your small-scale or commercial farming business. Whether you plan to run a dairy farm, hobby farm, or any other farm operation, we provide the resources you need for a bright future in farming.

What Skills Are Needed to Run a Small Farm Business?

Man hoeing on farm

Farm work encompasses a broad operation requiring several farming skills, a strong entrepreneurial drive, solid business acumen, a love for the outdoors, and much more. Mother nature can always toss problems your way that no experience or skill can solve, so don’t let the list be intimidating as all farmers and ranchers are constantly learning. Here are some of the essential skills necessary to start a farm:

  • Crop protection needs
  • Crop nutrition needs
  • Marketing
  • Repairing equipment
  • Animal Nutrition
  • Animal Health & Care
  • Financials & reporting
  • Repairing buildings
  • Managing labor or having good neighbors 🙂
  • Working with government agencies

Assess your farming skills and determine if you have the right skills and farming experience needed to operate an agriculture operation on your own. If necessary, you can gain experience by working at other farms. You can also build a team of other farmers, or surround yourself with a community to help you take care of aspects you do not have time for or do not have experience in. Farming is hard work, so the biggest skill needed is work ethic and the drive to make it a success.

Establish a Goal and Vision

A growing number of young people are engaging in raised bed gardening and finding ways to be involved in farming on some scale as a hobby or interest outside their professional career. Others have such a drive for farming they are leaving their 9-to-5 jobs in favor of a down-home farm life. Young farmers are fueled by ambition and a desire to connect with the land and find peace in farm life. Everyone has a different reason for starting a new farm and long-term goals.

Before going all-in on a farm business, we recommend aspiring farmers consider their goals and ability to excel in the farming industry.

Consider whether farming is right for you, or if you would prefer working for an existing farm or starting your backyard garden and coop as a hobby. If, however, you have your eyes on the prize and have a grand vision for meeting a consumer need in agriculture, you are on the right track to becoming a salt-of-the-earth farmer.

Develop a Business Plan

A strong business plan is critical to the success of any farm business. A fleshed-out plan provides essential information for you to have a measure of success or may be required by lenders and investors, although we strongly recommend starting with your own cash to avoid falling into debt. At the very least, a solid business plan should address operations, finance, and marketing.

Start by identifying your mission statement, which is the primary purpose of your farm. Why do you want to start a farm? What will your farm produce? What is the long-term vision for your farm? Who is your customer going to be? Beyond revenue, a mission statement conveys your values and core identity.

Include measurable goals for your small farm. Develop SMART goals that are specific, measurable, attainable, realistic/rewarding, and time-based. Considering your goals at a granular level ensures you have the best chance of achieving them.

Business plans should include background information about your operations, such as your location, farm size, farming experience, and current operations. Include how you plan to approach marketing, environmental sustainability, and other farming practices.

Be sure the plan also acknowledges the risks involved. What do you not know and how will you bridge that gap. What weather or animal health issues could jeopardize your goals and how will you proactively prevent them or deal with them if they arise?

The plan should include details of how you’ll be successful and also how you’ll manage through the tough times because farm life is always full of both; incredible highs and sad lows.

Create a Business Structure

Starting a farming business requires setting up its business structure. Agricultural operations can be set up as a sole proprietorship, limited liability company (LLC), corporation, cooperative, or partnership. How do you know which one is the best for your small farm business?

  • Limited liability corporation – An LLC is one of the most popular options among farmers since this structure can safeguard a farmer’s personal assets against business liabilities.
  • Sole proprietorship – Sole proprietorships give farmers total control of their business, from revenue to assets. However, this structure also makes farmers personally liable for all business liabilities.
  • Corporation, cooperative, or partnership – These business structures are not commonly chosen for a small farm business.

In addition to selecting a business structure for your farm business, you will need permits and licenses to run your operation, which varies by type of farm and property location. Refer to the USDA website for federal permits required and your state’s Department of Agriculture for state and local permits and licenses. Many ag colleges and universities such as Oregon State and Washington State have extension agencies that are also excellent resources to help understand the simplest steps to get involved in growing crops or raising animals.

Obtain Financing

One of the biggest challenges for beginning farmers is meeting their financial goals to start their own farm. The amount of required financial resources for new farmers to start a farm depends on the size of the operation and the type of agriculture production you decide. Costs can include fuel, equipment, seeds, fertilizer, and utilities.

The best way to fund your new venture is with your own cash. Relying on loans, home equity, or credit cards, especially in the beginning, can put your livelihood at great risk. A prospective farmer can start a small operation with under $5,000 in their backyard or on leased land. A good rule of thumb is spending under 50% of your start-up capital on the land and the rest on infrastructure and other start-up essentials.

Create a separate bank account to build up your personal cash and use it prudently for start-up costs. Revenue from sold farm goods can replenish this account as long as you spend only what you can afford. Working with a small budget can help you be more creative and find ways to stretch your dollar.

If your farm products have a big and consistent demand, there are several financing options available to accommodate expansion, including loans from friends and family or equity in the business, loans of lines of credit from financial institutions, or operating credit from suppliers. However, we recommend checking the interest rates and terms before taking this route.

Small business loans may require collateral or a solid business background. Consider a small farm loan from the U.S. Department of Agriculture (USDA). The USDA can provide beginning farmers and ranchers loans, particularly for farmers in their first ten years of business.

One of the best pieces of advice from seasoned farmers for new farmers is to avoid debt at all costs. Whether you need financing to buy land or meet the long list of operating costs, getting into debt can cost you your entire business if something goes wrong. Instead, we recommend relying on cash reserves to fund your operation.

Secure Land

Farm on large land

Whether you plan on buying or leasing farmland, the location must align with your intended operations and long-term vision. Buying land gives you complete control over the property but comes at a hefty upfront cost.

Leasing property from farmers and landlords is an excellent way to reduce upfront costs for new farmers and provide agricultural tax credits and increased property values for the property owners. It is a win-win.

Whether you lease or buy your property, you will need to consider various factors, including water access, topography, soil structure and quality, infrastructure (barns, coops, etc.), and proximity to where you will be selling your farm products.

Your land may determine the type of farming you engage in. You will need a relatively level land that drains well if growing crops. Crop production that does not require soil or livestock production can work well on hilly land. In some instances, land can be leveled, although at an expensive cost, to create a space for you to grow your food.

We recommend obtaining a soil sample from your farm and sending it into a lab for analysis. Lab analysis can determine the type and quality of soil on your property and decide whether it is appropriate for the kind of business you plan to run.

Consider the vegetation growing on your property, especially if you plan to raise livestock. Having pastures with various plant species can help feed your farm animals. Also, research the climate (precipitation levels, storm frequency, flooding, drought, frost) to determine how your farming operation will fare in this location.

Obtain Farm Equipment

Father and son repairing tractor

Buying new farm equipment is rarely the best option for young farmers or those with limited capital. Farm equipment is necessary to maintain the land, produce crops, and manage livestock. When purchasing equipment, consider if you or someone on your team has the proper mechanical skills to operate and repair the equipment.

Buying used equipment can save you money but may require more regular maintenance and repair than buying new. Some challenges involved with buying used equipment include repairing the equipment, the price or availability of used equipment, and ensuring it meets your farm needs.

In some instances, buying new equipment can make sense. As your farm business expands, you may need new tools to keep up with demand. New equipment may also be necessary if you do not have anyone on the farm who can repair the equipment or there is no used equipment available in your area for your particular farm needs.

Leasing equipment is another option to consider if you do not have the capital to invest in machinery upfront. Although leasing farming machinery can cost more in the long run, it can be a worthwhile alternative to buying new or used for some farmers. If cash flow is a big problem, consider borrowing or bartering for equipment only when you need it.

Market and Sell Products

Farmers market with lots of vegetables

How do you know what to grow/raise and where to sell your products? Ultimately, what your small farm sells depends on what you value, your experience, and what type of farming you enjoy. Farmers’ markets are one of the best places to sell your farm products. If your farm is near a high-traffic road, setting up a roadside farm stand or shop on your property can bring in customers who drive by.

If you envision your products on grocery store shelves, you will need to do plenty of research and planning to get them in stock. Grocery stores will want to ensure your operation has all the necessary permits and licenses. You must comply with all the storage, packaging, and processing regulations to establish your farm business as a professional enterprise.

Are you interested in getting your farm products in specialty grocers, restaurants, supermarkets, or other retail businesses? Consider these steps needed to get to the next level in your small farm business.

  • Create shelf-stable packaging with a strong aesthetic appeal to attract customers.
  • Establish an audience for your products through in-person networking or social media. Giving free samples at local events is a great way to get your name known.
  • Determine a fair price for your products to ensure you meet your overhead costs and make a profit.
  • In the beginning, create a list of potential buyers, particularly small and independent shops over supermarket chains.
  • Reach out to the manager or buyer of the store and deliver a quick elevator pitch that conveys your values and selling point.
  • Ensure you can meet the store’s production needs (delivery deadlines, product amount, etc.). Remember to under-promise and over-deliver.

Getting your farm products in stores can take several months to hash out the details, prepare your pitch, and deliver a quality product. Consider production costs, a marketing plan, your customer base, and other factors to set your business in the right direction.

Consider Risk Management

Starting a farm is inherently a risky endeavor. As a new farmer, you have various risk management tools at your disposal. For instance, raising more than one crop can ensure you do not put all your eggs in one basket. Farmers can also use risk management strategies like crop rotation and obtaining crop insurance.

  • Diversification – Producing a diversified range of crops or livestock throughout the year can maintain a continuous revenue stream and offset losses in underperforming areas.
  • Crop rotation – Crop rotation, especially when raising vegetables and the use of cover crops during the off-season, can reduce the risk of disease and promote healthy soil.
  • Crop insurance – Crop insurance can insure your crops, livestock, and revenue. Crop insurance coverage varies by crop and location of your farm.

Prepare for Expansion

The journey of starting a small farm is different for everyone. Some grow faster than others. While you may start with a small farming business, your operation can bring about new opportunities for expansion based on the market demands in your area. Your plans to start a farm can begin as just a hobby but gradually turn into full-on commercial farming business.

Develop an Exit Plan

No one wants to think about worst-case scenarios but having a plan B for the future of your agriculture business is vital. It is always best to hope for the best and prepare for the worst. Consider factors like how you plan to sell farm equipment if worse comes to worst.

If you plan to start a farm with a business partner, consider how long you intend the partnership to last. Will it last a few years or for the foreseeable future? If the partnership ends, who will have property rights for the land or the business name?

Creating an exit plan may seem counterintuitive for agricultural producers who envision a successful business model. However, it is a necessary aspect to consider to ensure you are prepared for nearly any situation down the road.

Start Growing Your Farm Business with Wilco Farm Stores

Starting a successful farming operation requires a business plan, market research, equipment, distribution channels, and other critical resources. Wilco Farm Stores provide farm businesses of all sizes with the right equipment and supplies to expand their business.