By Blake Jackson
Adding a new enterprise to a farm or rural business can open the door to additional income, customers, and long-term growth. Options may include agritourism, a farm store, value-added products, or a new service.
However, the Kentucky Center for Agriculture and Rural Development recommends carefully evaluating the opportunity before making a major investment.
Start by Understanding the Market
A promising idea does not automatically mean there is enough demand to support it. Identify your target customers, understand what they want, determine what they are willing to pay and research similar businesses in the area. For example, a produce farm considering a fall pumpkin patch or farm events should examine local competition, customer interest and potential visitor groups.
Build on Existing Resources
Consider how the new enterprise fits with the farm’s current operations. Land, equipment, facilities, products, skills, and an established customer base may provide a strong foundation. A farm already growing pumpkins and selling directly to consumers may be able to use those resources to create an agritourism experience while increasing sales of existing products.
Evaluate Time, Labor and Capacity
Expansion requires more than money. Owners should determine who will manage the new operation, how much additional labor will be needed, and whether existing facilities and equipment are sufficient. Seasonal businesses can create additional pressure when they overlap with planting, harvesting, or other busy periods. The owner’s time should also be treated as a real business cost.
Calculate Costs and Revenue
Create a realistic budget covering equipment, improvements, supplies, insurance, permits, marketing, technology and labor. Additional needs, such as parking, restrooms, fencing, signs and visitor facilities, can quickly increase expenses. At the same time, estimate pricing, customer volume, profit margins, and the time required to recover the initial investment.
Prepare for Risk
Every new venture carries uncertainty. Farmers should consider lower-than-expected sales, rising expenses, labor shortages, equipment failures, severe weather, liability concerns, and seasonal cash-flow challenges. Having contingency plans can reduce the impact of unexpected problems.
Define and Measure Success
Before launching, establish measurable goals, such as visitor numbers, additional revenue, profit margins, or new customers. After the first season, review actual results and identify what worked, what did not and what could be improved.
A thoughtful evaluation can help farm and rural business owners determine whether to launch, modify, expand, or discontinue a new enterprise.
Photo Credit: gettyimages-fertnig
Categories: Kentucky, Business