How to Start a Farm

ON THIS PAGE

• How to Start a Farm
• 15 Steps To Start a Farm
• How Big is the Farm Industry?
• What are the Key Segments of the Farm Industry?
• What External Factors affect the Farm Industry?
• Who are the Key Competitors in the Farm Industry?
• What are the Key Costs in the Farm Industry?
• What are the Typical Startup Costs for a New Farm?
• Additional resources in the Farm Industry

How to Start a Farm

If you’re looking to start a Farm, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key Farm industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a Farm, but succeeding in it!

Before we continue, here’s where you can access your farm business plan template since having a plan will be key to your success.

Download our Ultimate Farm Business Plan Template here

15 Steps To Start a Farm:

Starting a farm can be very profitable. With proper planning, execution and hard work, you can enjoy great success. Below you will learn the keys to launching a successful farm.

1. Choose the Name for Your Farm

The first step to starting a farm is to choose your business’ name.

This is a very important choice since your company name is your brand and will last for the lifetime of your business. Ideally you choose a name that is meaningful and memorable. Here are some tips for choosing a name for your farm:

1. Make sure the name is available: Check your desired name against trademark databases and your state’s list of registered business names to see if it’s available. Also, check to see if a suitable domain name is available.
2. Keep it simple: The best names are usually ones that are easy to remember, pronounce, and spell.
3. Think about marketing: Come up with a name that reflects the desired brand and/or focus of your farm.

 

2. Determine the Type of Farm You Will Launch

Determining the type of farm you will launch is a crucial decision that depends on your interests, resources, location, and market demand.

Here are several types of farms you can consider:

1. Crop farming involves growing vegetables, fruits, grains, or herbs.
2. Livestock farming includes raising cattle, poultry, swine, sheep, or goats.
3. Dairy farming focuses on producing milk and dairy products.
4. Specialty farming encompasses organic, heritage, mushroom, and beekeeping operations.
5. Niche farming covers gourmet produce, microgreens, cut flowers, and hydroponics.

 

3. Develop Your Farm Business Plan

One of the most important steps in starting a farm is to develop your farm business plan. The process of creating your plan ensures that you fully understand your market and your business strategy. The plan also provides you with a roadmap to follow and if needed, to present to funding sources to raise capital for your business.

To enhance your planning process, incorporating insights from a sample farm business plan can be beneficial. This can provide you with a clearer perspective on industry standards and effective strategies, helping to solidify your own business approach.

Your business plan should include the following sections:

1. Executive Summary: This section should summarize your entire business plan so readers can quickly understand the key details of your farm.
2. Company Overview: This section tells the reader about the history of your farm and what type of farm you operate. For example, are you a crop farm, livestock farm, or dairy farm.
3. Industry Analysis: Here you will document key information about the farm industry. Conduct market research and document how big the industry is and what trends are affecting it.
4. Customer Analysis: In this section, you will document who your ideal or target customers are and their demographics. For example, how old are they? Where do they live? What do they find important when purchasing products like the ones you will offer?
5. Competitive Analysis: Here you will document the key direct and indirect competitors you will face and how you will build a competitive advantage.
6. Marketing Plan – your marketing plan should address the 4Ps: Product, Price, Promotions and Place.
• Product: Determine and document what products/services you will offer.
• Prices: Document the prices of your products/services.
• Place: Where will your business be located, and how will that location help you increase sales?
• Promotions: What promotional methods will you use to attract customers to your farm? For example, you might decide to use pay-per-click advertising, public relations, search engine optimization, and/or social media marketing.
7. Operations Plan: In this section, you will determine the key processes you will need to run your day-to-day operations. You will also determine your staffing needs. Finally, in this section of your plan, you will create a projected growth timeline showing the milestones you hope to achieve in the coming years.
8. Management Team: This section details the background of your company’s management team.
9. Financial Plan – finally, the financial plan answers questions including the following:
• What startup costs will you incur?
• How will your farm make money?
• What are your projected sales and expenses for the next five years?
• Do you need to raise funding to launch your business?

 

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4. Choose the Legal Structure for Your Farm

Next you need to choose a legal structure for your farm and register it and your business name with the Secretary of State in each state where you operate your business.

Below are the five most common legal structures:

1) Sole proprietorship

A sole proprietorship is a business entity in which the owner of the farm and the business are the same legal person. The owner of a sole proprietorship is responsible for all debts and obligations of the business. There are no formalities required to establish a sole proprietorship, and it is easy to set up and operate. The main advantage of a sole proprietorship is that it is simple and inexpensive to establish. The main disadvantage is that the owner is liable for all debts and obligations of the business.

2) Partnerships

A partnership is a legal structure that is popular among small businesses. It is an agreement between two or more people who want to start a farm together. The partners share in the profits and losses of the business.

The advantages of a partnership are that it is easy to set up, and the partners share in the profits and losses of the business. The disadvantages of a partnership are that the partners are jointly liable for the debts of the business, and disagreements between partners can be difficult to resolve.

3) Limited Liability Company (LLC)

A limited liability company, or LLC, is a type of business entity that provides limited liability to its owners. This means that the owners of an LLC are not personally responsible for the debts and liabilities of the business. The advantages of an LLC for a farm include flexibility in management, pass-through taxation (avoids double taxation as explained below), and limited personal liability. The disadvantages of an LLC include lack of availability in some states and self-employment taxes.

4) C Corporation

A C Corporation is a business entity that is separate from its owners. It has its own tax ID and can have shareholders. The main advantage of a C Corporation for a farm is that it offers limited liability to its owners. This means that the owners are not personally responsible for the debts and liabilities of the business. The disadvantage is that C Corporations are subject to double taxation. This means that the corporation pays taxes on its profits, and the shareholders also pay taxes on their dividends.

5) S Corporation

An S Corporation is a type of corporation that provides its owners with limited liability protection and allows them to pass their business income through to their personal income tax returns, thus avoiding double taxation. There are several limitations on S Corporations including the number of shareholders they can have among others.

Once you register your farm, your state will send you your official “Articles of Incorporation.” You will need this among other documentation when establishing your banking account (see below). We recommend that you consult an attorney in determining which legal structure is best suited for your company.

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5. Secure Startup Funding for Your Farm (If Needed)

In developing your farm business plan, you might have determined that you need to raise funding to launch your business.

If so, the main sources of funding for a farm to consider are personal savings, family and friends, credit card financing, bank loans, crowdfunding and angel investors. Angel investors are individuals who provide capital to early-stage businesses. Angel investors typically will invest in a farm that they believe has high potential for growth.
 

6. Secure a Location for Your Business

When searching for the right space for your farm, consider the following factors:

• Location: Choose a location with suitable soil quality, climate, and proximity to markets and suppliers.
• Land Size: Determine the size of land you need to accommodate your chosen farming activities and future expansion plans.
• Topography: Assess the land’s topography for factors like slope, drainage, and elevation, which can impact water management and crop growth.
• Soil Quality: Conduct soil tests to understand soil composition, fertility, and any necessary amendments.
• Water Supply: Ensure access to a reliable and adequate water source for irrigation, livestock, and general farm use.
• Infrastructure: Evaluate existing infrastructure, such as buildings, barns, and fences, and consider their suitability for your farming needs.

 

7. Register Your Farm with the IRS

Next, you need to register your business with the Internal Revenue Service (IRS) which will result in the IRS issuing you an Employer Identification Number (EIN).

Most banks will require you to have an EIN in order to open up an account. In addition, in order to hire employees, you will need an EIN since that is how the IRS tracks your payroll tax payments.

Note that if you are a sole proprietor without employees, you generally do not need to get an EIN. Rather, you would use your social security number (instead of your EIN) as your taxpayer identification number.
 

8. Open a Business Bank Account

It is important to establish a bank account in your farm’s name. This process is fairly simple and involves the following steps:

1. Identify and contact the bank you want to use.
2. Gather and present the required documents (generally include your company’s Articles of Incorporation, driver’s license or passport, and proof of address).
3. Complete the bank’s application form and provide all relevant information.
4. Meet with a banker to discuss your business needs and establish a relationship with them.

 

9. Get a Business Credit Card

You should get a business credit card for your farm to help you separate personal and business expenses.

You can either apply for a business credit card through your bank or apply for one through a credit card company.

When you’re applying for a business credit card, you’ll need to provide some information about your business. This includes the name of your business, the address of your business, and the type of business you’re running. You’ll also need to provide some information about yourself, including your name, Social Security number, and date of birth.

Once you’ve been approved for a business credit card, you’ll be able to use it to make purchases for your business. You can also use it to build your credit history which could be very important in securing loans and getting credit lines for your business in the future.
 

10. Get the Required Business Licenses and Permits

Starting a farm typically involves obtaining various licenses and permits to comply with local, state, and federal regulations. The specific requirements can vary depending on the type of farming activities you plan to undertake and your location.

Here are common licenses and permits you may need:

• Business License: Obtain a general business license or operating permit from your local city or county government. This is often the first step for any business.
• Zoning and Land Use Permits: Check local zoning regulations to ensure that farming is allowed on your chosen land. You may need a zoning permit or land use permit.
• Farm Operation Permit: Some areas require specific permits for farming operations. Contact your local agricultural extension office or county government to inquire about agricultural permits.
• Environmental Permits: If your farm activities impact the environment, you may need permits related to water usage, waste management, or land conservation. Examples include permits for well drilling, water discharge, or wetland use.
• Livestock and Animal Health Permits: If you plan to raise livestock, you may need permits related to animal health, such as permits for importing livestock or transporting animals.
• Crop Production Permits: Depending on your crop choices, you might need permits for planting certain crops, especially if they are genetically modified or regulated by federal agencies.
• Pesticide and Herbicide Application Licenses: If you intend to use pesticides or herbicides, you may need licenses to handle and apply these chemicals. Training and certification may be required.
• Water Rights and Irrigation Permits: If you use water from a natural source for irrigation, you may need water rights or irrigation permits.

Depending on the type of farm you launch, you will have to obtain the necessary state, county and/or city licenses.
 

11. Get Business Insurance for Your Farm

Operating a farm comes with inherent risks, and having the right insurance coverage is essential to protect your assets, property, and livelihood. The type of insurance you need for your farm can vary depending on factors like the size of your operation, the types of crops or livestock you raise, and your specific needs.

Here are some common types of insurance coverage for farms:

• Farmowners Insurance: Farmowners insurance is a comprehensive policy that combines coverage for your home, personal property, and farm operations. It often includes dwelling coverage, personal property coverage, and liability coverage.
• Crop Insurance: Crop insurance provides protection against the loss of crops due to natural disasters, adverse weather conditions, disease, or other perils. It helps safeguard your income and investments in planting and cultivating crops.
• Livestock Insurance: Livestock insurance covers the value of your livestock (e.g., cattle, poultry, swine) in case of loss due to accidents, disease outbreaks, or other covered events.
• Farm Equipment Insurance: This type of insurance protects your farm machinery, tractors, and equipment against damage, theft, or loss.
• Farm Liability Insurance: Farm liability insurance covers bodily injury and property damage claims that may arise from farm-related activities, such as agritourism or events held on your property.
• Workers’ Compensation Insurance: If you have employees, workers’ compensation insurance is usually required by law. It provides coverage for medical expenses and lost wages if an employee is injured on the job.
• Farm Auto Insurance: Farm auto insurance covers vehicles used for farm operations, such as trucks, trailers, and farm vehicles. It provides liability and physical damage coverage.
• Specialty Insurance: Depending on your specific farm activities, you may need specialty insurance, such as dairy farm insurance, poultry farm insurance, or winery insurance, tailored to your unique risks.

Find an insurance agent, tell them about your business and its needs, and they will recommend policies that fit those needs.
 

12. Buy or Lease the Right Farm Equipment

The equipment you need to run your farm will depend on the type of farming activities you plan to undertake, the scale of your operation, and your specific needs.

Here is a list of common types of equipment used in various aspects of farm operations:

• Tractors: Tractors are versatile workhorses used for plowing, tilling, planting, and various other tasks. They come in different sizes and configurations.
• Implements and Attachments: Implements like plows, harrows, cultivators, and seeders are attached to tractors for specific field preparation and planting tasks.
• Harvesting Equipment: Depending on your crops, you may need equipment like combine harvesters, cotton pickers, grape harvesters, or potato diggers for efficient crop harvesting.
• Livestock Handling Equipment: Livestock farms often require equipment such as cattle chutes, corrals, and loading ramps for handling animals safely.
• Irrigation Systems: Irrigation equipment includes pumps, pipes, and sprinkler or drip systems to provide water to crops efficiently.
• Farm Vehicles: Vehicles like trucks, trailers, and ATVs are used for transportation of produce, equipment, and workers around the farm.
• Storage Facilities: Storage equipment includes silos, grain bins, cold storage, and warehouses for storing crops, feed, and equipment.
• Fencing and Gates: Fencing and gates are essential for securing your property and managing livestock.

 

13. Develop Your Farm Marketing Materials

Marketing materials will be required to attract and retain customers to your farm.

The key marketing materials you will need are as follows:

1. Logo: Spend some time developing a good logo for your farm. Your logo will be printed on company stationery, business cards, marketing materials and so forth. The right logo can increase customer trust and awareness of your brand.
2. Website: Likewise, a professional farm website provides potential customers with information about the products you offer, your company’s history, and contact information. Importantly, remember that the look and feel of your website will affect how customers perceive you.
3. Social Media Accounts: Establish social media accounts in your company’s name. Accounts on Facebook, Twitter, LinkedIn, and/or other social media networks will help customers and others find and interact with your farm.

 

14. Purchase and Setup the Software Needed to Run Your Farm

Running a modern farm efficiently often involves using various software solutions to manage different aspects of operations, from record-keeping to farm planning and marketing.

Here are some types of software that can be valuable for running a farm:

• Farm Management Software: Farm management software helps you organize and track various farm activities, including crop planning, field management, and equipment maintenance. It can also assist with labor management, budgeting, and overall farm operations.
• Financial Software: Financial software can help you manage budgeting, accounting, payroll, and financial reporting. QuickBooks and other accounting software are commonly used for this purpose.
• Inventory Management Software: Inventory management software allows you to keep track of stock levels for crops, seeds, fertilizers, and other inputs, ensuring that you have the right resources when needed.
• Weather Forecasting Tools: Weather forecasting apps and tools help you monitor weather conditions and plan farm activities accordingly, such as planting and harvesting.
• Market Analysis and Pricing Software: Software that provides market analysis, pricing trends, and demand forecasts can assist in making informed decisions about what crops or livestock to produce and when to sell.
• Livestock Management Software: For livestock operations, specialized software helps track animal health, breeding records, and feed management. It can also assist with managing animal inventory.
• GIS and Mapping Software: Geographic Information Systems (GIS) software and mapping tools help with land use planning, soil analysis, and precision farming by providing detailed maps of your fields.
• Crop Monitoring and Precision Agriculture Tools: Precision agriculture software and sensors enable real-time monitoring of crop health and growth, allowing for optimized irrigation, fertilization, and pest control.

Research the software that best suits your needs, purchase it, and set it up.
 

15. Open for Business

You are now ready to open your farm. If you followed the steps above, you should be in a great position to build a successful business. Below are answers to frequently asked questions that might further help you.
 

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How Big is the Farm industry?

According to First Research and IBISWorld, there are more than 2 million companies in the US agriculture sector, with combined revenue of $41.8 billion. This represents fairly slow annual growth of just 0.8% over the past five years (2011-16).

What are the Key Segments of the Farm Industry?

The Farm industry can be segmented into crop farming and animal production. Crop farms typically concentrate on one or a few crops, depending on the location of the farm. Crop farms make up over half of total farm revenue. Major US crops consist of corn, soybeans, fruits and nuts, wheat, vegetables and melons, cotton, and potatoes. However, 80% of crop farm revenue comes from grain, oil seed, or dry beans/peas.

Animal production farms, the other half of the farm industry, produce live cattle and calves, poultry and eggs, dairy products, live hogs and pigs, and farmed fish.

What External Factors Affect the Farm Industry?

A number of factors affect the performance of the Farm industry. These drivers include:

• Agricultural price index – Commodity prices are the foundation for farm revenue fluctuations. While higher commodity prices can mean higher revenue, it can have the opposite effect if consumers are unwilling to pay the higher prices.
• Natural disaster index – Weather conditions are the largest factor controlling crop yields. Extreme weather can be disastrous for some farmers, while providing a boost to others. For example, if pasture land is negatively affected by bad weather, corn farmers experience increased demand for their crop as an input for livestock feed.
• Population – A growing population results in higher food demands.
• Trade-weighted index – Exchange rates affect the prices of exported farm goods. The higher the trade-weighted index, the less competitive American farm products are in international markets.
• World GDP – As the total value of goods and services increase globally, demand for agricultural imports increase as well.

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Who are the Key Competitors in the Farm Industry?

The sector is highly fragmented, meaning no single company has a significant market share. Cargill Inc., the company with the largest market share, holds just 1.6% of the market.

What are the Key costs in the Farm Industry?

Purchases – Purchases are the largest expense for the industry. On average, farms spend over 60% of their revenue on inputs such as fertilizers, pesticides, farm supplies, agricultural machinery, feed, and animals.

Wages – Wage costs are low in the farm industry, largely due to the fact that many farms are owner- and family-operated.

Other – Other costs include rent, utilities, outsourced services, veterinary expenses, and warehousing.

What are the Typical Startup Costs for a New Farm?

The one-time costs for starting a farm include:

• Land and buildings
• Farm equipment and machinery
• Legal expenses

In addition to these one-time costs, a farm typically needs to purchase the following products and services on an ongoing basis:

• Farm inputs – Fertilizer, herbicides, pesticides, seed, feed, etc.
• Business license
• Supplies

Farm Business Plan Example PDF

Download our farm business plan pdf here. This is a free farm business plan example to help you get started on your own farm plan.
 

Additional resources in the Farm market

For additional information on the Farm market, consider these industry resources:

• US Census Bureau: www.consultant-news.com
• US International Trade Commission: www.usitc.gov
• US Department of Agriculture: www.usda.gov

 

 

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