Solve for X-pansion

Beyond the cycle of seasons, markets and weather patterns, farming is a long-term business. Over time, farmers expect growth — it’s what they do. Like raising crops, business growth requires planning, care and constant adjustments.

Expansion decisions start with balancing opportunities with resources and risk with reward, while accounting for uncontrollable variables like prices and market conditions. To customize the formula for success, every farm operation should define variables that can be controlled, including the why, what, when and how of growth.

Why Do You Want to Grow?

To gain a clear understanding of why you want to grow, define the “why” behind this decision. Maybe you need to grow because the cost of living is increasing. Or a child is headed to college. Perhaps someone wants to join your operation. Or you want to have more influence in a cooperative. You may want a new challenge or to fulfill a dream.

Reasons to expand are as unique as each operation. Validate your reasons with other members of the operation and trusted outside advisors. Growth of any kind requires energy and investment; clear goals keep you motivated and focused.

What Does Farm Expansion Mean to You?

Often, we think farm expansion equals more acreage. But bigger isn’t necessarily always better. Many other approaches can lead to healthy business growth.

• Diversification spreads risk by engaging the farm in additional markets. Examples include broadening or shifting crop mix, investing in livestock, adding a business (like seed sales), or marketing directly to consumers.
• Side businesses add a new income stream to the farm. These opportunities are endless. Add a pumpkin patch or event venue. Become an educational farm tour host. Partner with a local restaurant to supply a specific ingredient. Offer pick-your-own flowers. Create and garner a social media platform with a following that attracts advertisers. Side hustles often require significant planning and time, but they can also be incredibly rewarding.
• Boosting efficiency with existing resources adds to the bottom line, creating growth without adding major assets. This can include farming land more intensively, adjusting management practices like timing to optimize yield, making farm improvements, fully using machinery capacity through customer farming or finding markets for existing byproducts like straw or manure. Given the current farm economy, this may be one of the healthiest ways to grow.

Consider the people involved when figuring out what expansion should look like. Capitalize on personal strengths and skills, especially when expanding to include new partners in the operation. And most importantly, choose opportunities that excite your team, so you are willing to invest energy and resources to make it work.

When Do You Want to Expand?

Once you know what you want expansion to look like, take a close look at the conditions both inside and outside of the farm. Examine financials and assets closely, with business, fiscal and legal advisors as needed, to fully understand what you have to work with and how that changes over time.

With this knowledge, establish an expansion timeline.

While some opportunities, like purchasing that 120 acres next to the home farm, likely only arise once in your career. Others, like selling sweet corn or apples at local farmers markets, can be an annual endeavor.

Understanding farm debt, assets and expected income can clarify when it’s time to make your planned expansion moves. In truly bearish economies, this variable could include learning what factors to watch, like interest rates, so you know when conditions become right to act. Such signals indicate the right time to offer custom planting services, to break ground on establishing a cut-your-own Christmas tree business, or to make a standing offer on a field.

How to Execute Your Expansion Plan

Finally, dig into the nuts and bolts of your vision.

Do the research. Meet with contacts. Adjust the budget. Apply for the grant. Decide how to promote the service. Plan how to manage the additional workload. Protect existing assets.

Growing pains are common, especially when some aspects of expansion end up requiring more time or investment than initially expected. That’s a reason to get into the nitty-gritty details ahead of time. Anticipating potential challenges will help you prepare for and navigate through unexpected issues that arise.

Balance the Equation

As you fill in those expansion formula variables, verify that you have the resources needed to take advantage of an opportunity. Leasing a field several miles beyond your current footprint may not be worth the additional time and fuel needed to get to it. Direct-to-customer meat sales must factor in delivery time and logistics.

Understand the risks you are willing to take, beyond those inherent in planting crops and raising livestock. And always remember that the potential rewards can include more than just additional income. Intangible rewards like stronger relationships or discovering and developing personal skills help offset the risks.

This article is for informational purposes only and does not constitute financial or business advice for your farming operation.