Selecting Alternative Enterprises for Your Farm
Change is continuous in farming. Prices, farm programs, trade policies, technology, markets, and consumer preferences all change continuously just to name some of the causes. Some farm enterprises benefit from these changes and some are harmed, so the search for profitable alternatives is a continuous challenge. There are seven important questions that should guide the search for alternative enterprises. Answering each one of these is important to achieving success.
1. Why are you interested in alternative enterprises? Some of the issues to think about include your lifestyle and family income goals, the farm products or services of interest to you and other options that might help you achieve your goals. It also helps to examine the time and investment capital you have available.
2. What are consumers interested in buying and who will be your customers? Many farm families are not accustomed to studying their customers because they sell commodities that move into global markets. However, many of thealternatives to thesetraditionalfarm enterprises have local or specialty markets, so knowing your customers and marketing issues become very important.
3. What are you planning to sell and how will you sell it? There are four parts to the answer to this question: your product or service, how you will get the product to your customer, the way you will promote it, and how you will set your price.
4. Will your product require processing and, if so, how will you produce it? Food products have a host of technical, regulatory and production requirements for production, distribution and sale.
5. What business and legal issues apply? Depending on the type of enterprise and the scale of operation you may need to think about risk management & insurance, form of business organization, contracts, employment law compliance, business and employment taxes and intellectual property protection.
6. What resources will you need? Once your ideas have been well developed and you have a production and marketing plan you should assess just what resources you will need and where they will come from. These may include human resources (including family members and external advisors), facilities & equipment, suppliers and distributors, and financing (including your own money and borrowing needs)
7. Will it be financially feasible and worthwhile? This is most people’s least favorite part of planning but just because you CAN produce and sell something doesn’t mean it will be a financial success.
Realize that enterprise selection is a complicated and demanding process. It should be considered no different than evaluating any other business opportunity. The amount of time and energy spent in research should be directly related to the amount of capital at risk and the potential rewards. All of this takes a lot of work but it is well worth taking time to make sure the idea you are considering will work and to avoid problems or disappointments down the road.