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Brainstorming New Enterprises for Your Farm
When Andrew Dixon graduated from high school in 2006, he and his parents began brainstorming new businesses that might make room for him financially on his family’s farm near Tullahoma, Tennessee. The farm’s main enterprises are raising cattle and growing corn, wheat, and soybeans.
Finding new ways to earn income was old hat to Dixon. A few years earlier, his parents, Steve and Karen Dixon – together with their children, Andrew, Stephanie, and Philip – had looked for ways to supplement farm revenue.
The brainstorming led them to the University of Tennessee’s Center for Profitable Agriculture (CPA). A collaboration between UT Extension and the Tennessee Farm Bureau Federation, the CPA helps farm families evaluate and develop value-added enterprises.
The CPA staff and the Dixons investigated options spinning from the family’s interests and their existing crop production. What emerged was a business of selling decorative cornstalk bundles.
“By the time I was a senior in high school, we were selling 5,000 bundles a year, primarily through Kmart,” says Dixon. “But when I graduated high school, we started looking for additional enterprises, so that each of us kids could work full time on the farm if that’s what we wanted to do.”
The search again drew on guidance from the CPA. Also helpful were neighbors who had been running an agritourism business. They were shutting their doors and offering to shuttle advice and clients to the Dixons.
The family ran with the opportunity. Today, their agritourism business, Grandaddy’s Farm, along with a business of selling square straw bales, supplements the crop and cattle enterprises. The farm’s revenue stream is large enough to employ Dixon, his brother Philip, their father, grandfather, and an employee full time.
The agritourism season is brief but intense. From mid-September through November 1, the farm is open part days to the public. There is a 4½-acre corn maze, 18 acres of pumpkins, 1,600 mums, winter squash and gourds, and cornstalk bundles for sale.
Farm activities center on pig races, duck races, an animal corral, a playground, hayrides, and specialty foods like apple cider slushes and apple cider doughnuts.
To handle the workload, the Dixons engage 30 seasonal employees.
While the Grandaddy’s Farm agritourism venture has worked for the Dixons, no one size fits all when it comes to successful value-added businesses. Each must reflect the unique strengths and aptitudes of an individual farm family.
“Location is also important, as is the target market and how farmers plan to access that market,” says CPA Director Rob Holland. “In addition, farmers must consider whether or not they can produce the product at a low enough cost to allow them to offer it at an acceptable price for the consumer.”
A starting point for finding workable ideas for value-added ventures is to look at the commodities the farm already produces and enterprises in which the family is already involved. Are there value-added products that might be developed and marketed from these?
“Cattle producers, for instance, might consider processing and marketing meat products directly to the consumer,” says Holland. “Other complementary value-added products might develop from there. Customers of some of our direct marketing beef producers have asked for other products, prompting the farmers to start raising sheep and hogs and then also offering meat products from these animals.
“When they take stock of what’s being produced on their farm, there’s no limit to ventures farmers might consider for value-added businesses,” he says.
Individual interests are also fertile ground for finding a business idea that makes a good fit for a farm family, says Holland. Next-generation partners coming into the operation may bring with them special interests and skills that can yield value-added businesses.
Once armed with a business idea, Holland suggests evaluating it against the backdrop of the following four factors.
Regulations. Research the state or federal regulations affecting the business you have in mind. Get an estimate of what it might cost to meet these regulations.
“Many of the inquiries we get from farm families who have an idea for a business have to do with concerns over regulations,” says Holland. “They want to know whether or not it would be cost prohibitive to meet state or federal regulations affecting the prospective enterprise.”
Marketing. Envisioning your marketplace and how to access it gives an idea of the viability of a possible business venture. “When considering selling directly to consumers, figure out where and how you’ll sell your products,” says Holland.
On-farm retail stores, for instance, can work when the surrounding population offers a significant customer base. If products must be transported to another location to be sold, farmers markets offer a possible outlet.
“Selling at farmers markets can work well for some farm families, but it may be difficult from the standpoint of labor availability for others,” says Holland. “Conduct a realistic appraisal of your ability to market in the venues that are open to you.”
Pricing. “Determine what the market will bear in terms of price,” says Holland. “You want to set a price that’s high enough to cover cost of production, but not so high that it discourages sales.”
Risk. Developing a value-added enterprise may increase business risks for some farm operations. Because these businesses are typically unique to the individual farm family, the marketplace is nonexistent at the outset and must be discovered over time.
“Manage that risk by doing your homework,” says Holland. “Write a business plan that helps you evaluate financial risk. Develop a Plan B in case the enterprise fails or is slow to take off. Don’t try to develop the business too fast.”
One option for managing risk, for instance, is to strike up a copacking arrangement with an established processor for the packaging of the product. “This lets you test sales potential before investing in processing infrastructure,” he says.
Doing your homework before jumping into a value-added venture can make the difference between success or failure.
“It’s definitely worth it to study and analyze the idea before investing in it,” says Holland.
Keys To Success
Farm families who succeed at developing profitable value-added ventures share common keys to success, says Holland. Here are five.
• Financial stability. While a value-added venture can increase farm revenue over time, rarely does it bail out a farm’s sinking economy. “It takes some investment, so a value-added business tends to best lend itself to a farm operation that’s financially strong,” says Holland.
• Commitment to the long term. “It takes a while to grow the business and discover the market,” he says.
• People skills. Being able to communicate with customers is key.
• Marketing savvy. Developing a customer base takes creativity and understanding of the marketplace.
• Product quality. Maintaining a consistently high product quality is the centerpiece of success.