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How to Start a Farm

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Published on March 18, 2022

Updated on September 21, 2022

How to Start a Farm

Disclaimer: Step by Step Business’ content is for informational and educational purposes only. It’s not intended to be a substitute for professional legal or tax advice. All of our articles are thoroughly reviewed and fact-checked by our editorial team. Read our editorial guidelines for more details.

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Fast Facts

Investment range

$81,550 - $154,100

Revenue potential

$180,000 - $360,000 p.a.

Time to build

6 – 12 months

Profit potential

$36,000 - $72,000 p.a.

Industry trend

Growing

Commitment

Full-time

How to Start a Farm

In the pandemic era, when crowded places are often seen as danger zones, farm life has gained great appeal. What could be better than working outdoors, cultivating the land and producing healthy, all-natural, life-sustaining food? If you’ve ever dreamed of starting a farm, it’s actually not that difficult to make it a reality. You’ll be joining a trillion-dollar US industry and doing work that, at least most of the time, you love. 

Getting started will require significant investment, but the federal government offers a great deal of financial support for farmers. You’ll need to learn about farming, but you’ll also need to plan and prepare for the business side of the operation. Fortunately, this step-by-step guide will walk you through the entire process of developing and starting a successful farm.

Step 1: Decide if the Business Is Right for You

Pros and cons

Starting a farm has pros and cons to consider before deciding if it’s right for you. 

Pros

  • Gratification – Producing food from the land can be very fulfilling
  • Rural Lifestyle – Farm life tends to be slower, calmer, less stressful
  • Legacy – Build something to hand down to future generations

Cons

  • Hard Work – Farming is very labor-intensive, with long hours
  • High Startup Costs – Land and equipment are expensive

Farm industry trends

Industry size and growth

  • Industry size and past growth – Agriculture, food production, and related industries contributed $1.055 trillion to the US economy in 2020, with farm output representing $134.7 billion of that total.[1] … Continue reading 
  • Growth forecast – US agricultural production is expected to remain steady in the coming years.
  • Number of businesses – In 2020, 2.02 million farms were operating in the US.
  • Number of people employed – In 2020, the US farm industry employed 2.6 million people.[2] … Continue reading 
farm industry size and growth

Trends and challenges

Trends in the farming industry include:

  • Regenerative agriculture is set to shape the future of farming. Regenerative agriculture means using sustainable farming techniques including topsoil regeneration, biodiversity, recycling of farm waste, and improving the water cycle.
  • Growing hemp along with other crops is becoming popular because hemp is extremely good for the soil and environment and offers many product possibilities. 
  • People are looking to the “farmacy” for healthy food choices and are buying based on the branding on foods that indicate that they are healthier such as organic, natural, non-GMO, and gluten-free. 

Challenges in the farming industry include:

  • Farm production costs are rapidly rising with inflation, particularly the cost of fertilizer which has more than doubled since hitting a low in 2020, which is putting a strain on farmers.
  • Climate change is a growing risk for farmers, with droughts and other extreme weather threatening crops.
  • Consolidation has remade US agriculture, as the number of farms has fallen from more than 6 million in the early 1940s to 2 million today, while the average farm size has more than doubled over that same span. 
farm industry Trends and Challenges

Demand hotspots

  • Most popular states – The most popular states for farmers are Pennsylvania, New York, and Ohio.[3]https://www.zippia.com/farmer-jobs/best-states/
  • Least popular states – The least popular states for farmers are Louisiana, Wyoming, and Idaho.
Farm industry demand hotspots

What kind of people work in Farming?

  • Gender – 26.6% of farmers are female, while 69.5% are male.[4]https://www.zippia.com/farmer-jobs/demographics/
  • Average level of education – The average farmer has a bachelor’s degree.
  • Average age – The average farmer in the US is 48.6 years old.
farm industry demographics

How much does it cost to start a farm business?

Your startup costs are highly dependent on what kind of farm you decide to start. These calculations will assume that you’re starting a small vegetable farm. 

Startup costs for a small farm range from $80,000 to $150,000 or more. The largest expenses are for farming equipment and a down payment on the property. If you need financing, you could look for applicable loans and grants on the USDA farm service website

If you have no farming experience, the best way to learn is hands-on. You can be a farmer’s apprentice or volunteer to help on a farm in your local area. You could also go to an agriculture school in your area. Cornell University also has more than 20 online courses for small farmers. Each takes 5 to 8 weeks and costs about $200. 

You’ll need a handful of items to successfully launch your farm, including: 

  • 30 HP diesel 4X4 tractor 
  • 5 foot three point rototiller
  • Double toolbar and “A” frame (5.5 feet wide) with assortment of clamps, standards, Shovels, sweeps etc.
  • Push planter
  • Various hand and push cultivation tools
  • Single three point ripper shank capable of running 2 feet deep
  • Bed shaper/marker
  • Three point heavy tandem disc
  • Flail mower
  • 6 foot spring-tooth cultivator
  • Box scraper
  • Under-cutter
  • Three-point forklift attachment for moving harvest bins, etc.
  • Hand crank broadcaster for broadcasting cover crop seed
  • Backpack flamer
Start-up CostsBallpark RangeAverage
Setting up a business name and corporation$150 - $200$175
Business licenses and permits$100 - $300$200
Insurance$100-$300$200
Business cards and brochures$200 - $300$250
Website setup$1,000 - $3,000$2,000
Property down payment$60,000 - $100,000$80,000
Farm equipment$20,000 - $50,000$35,000
Total$81,550 - $154,100$117,825

How much can you earn from a farm business?

Your earnings will vary greatly based on the size of your farm and what you produce. Generally, an established vegetable farm generates $60,000 in annual sales per acre. Profit margins for a farm are about 20%.

In your first year or two, if you have a six-acre farm and you get production from half of it, you’ll be bringing in $180,000 in annual revenue. This would mean $36,000 in profit, assuming that 20% margin. As you get production going on the whole farm, your annual revenue will be $360,000, so you’d make a tidy profit of $72,000.

farm earnings forecast

What barriers to entry are there?

There are a few barriers to entry for a farm. Your biggest challenges will be:

  • The startup costs and finding financing
  • Learning farm skills
  • Finding fertile land in a good location

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Step 2: Hone Your Idea

Now that you know what’s involved in starting a farm, it’s a good idea to hone your concept in preparation to enter a competitive market. 

Why? Identify an opportunity

Research farms in your area to examine their products, price points, and what sells best. You’re looking for a market gap to fill. For instance, maybe the local market is missing an organic fruit farm or a squash farm. 

You might consider targeting a niche market by specializing in a certain aspect of your industry, such as berries or hemp.

This could jumpstart your word-of-mouth marketing and attract clients right away. 

What? Determine your products or services

You’ll need to determine what you want to grow, but you can also add other products to increase your revenue. You could produce cottage food such as jams and jellies or pies to sell to markets, or you could set up your own farmer’s market and sell products directly. 

How much should you charge for farm products?

To determine your prices, you’ll need to look at market prices in your area. You’ll sell at wholesale prices to markets and grocery stores, and retail prices when you sell directly to consumers.

Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.

Who? Identify your target market

Your target market will be mainly markets and grocery stores. You should reach out to them and form partnerships to sell your products. If you set up your own farmer’s market, your target market will be broad. You should spread out your marketing to include sites like TikTok, Instagram, Facebook, and LinkedIn. 

farm industry rating

Step 3: Brainstorm a Business Name

Your business name is your business identity, so choose one that encapsulates your objectives, services, and mission in just a few words. You probably want a name that’s short and easy to remember, since much of your business, and your initial business in particular, will come from word-of-mouth referrals.

Here are some ideas for brainstorming your business name:

  • Short, unique, and catchy names tend to stand out
  • Names that are easy to say and spell tend to do better 
  • Name should be relevant to your product or service offerings
  • Ask around — family, friends, colleagues, social media — for suggestions
  • Including keywords, such as “farm” or “farm fresh”, boosts SEO
  • Name should allow for expansion, for ex: “Jim’s Bakery” over “Jim’s Cookies”
  • Avoid location-based names that might hinder future expansion
  • Use online tools like the Step by Step Business Name Generator. Just type in a few keywords and hit “generate” and you’ll have dozens of suggestions at your fingertips.

Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these. 

Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that sets your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.

Step 4: Create a Business Plan

Every business needs a plan. This will function as a guidebook to take your startup through the launch process and maintain focus on your key goals. A business plan also enables potential partners and investors to better understand your company and its vision:

  • Executive Summary: Brief overview of the entire business plan; should be written after the plan is complete.
  • Business Overview: Overview of the company, vision, mission, ownership, and corporate goals.
  • Product and Services: Describe your offerings in detail.
  • Market Analysis: Assess market trends such as variations in demand and prospects for growth, and do a SWOT analysis.
  • Competitive Analysis: Analyze main competitors, assessing their strengths and weaknesses, and create a list of the advantages of your services.
  • Sales and Marketing: Examine your companies’ unique selling propositions (USPs) and develop sales, marketing, and promotional strategies.
  • Management Team: Overview of management team, detailing their roles and professional background, along with a corporate hierarchy.
  • Operations Plan: Your company’s operational plan includes procurement, office location, key assets and equipment, and other logistical details.
  • Financial Plan: Three years of financial planning, including startup costs, break-even analysis, profit and loss estimates, cash flow, and balance sheet.
  • Appendix: Include any additional financial or business-related documents.

If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist at Fiverr to create a top-notch business plan for you.

Step 5: Register Your Business

Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.

Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business! 

Choose where to register your company

Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you’re planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to farms. 

If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state. 

Choose your business structure

Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your farm will shape your taxes, personal liability, and business registration requirements, so choose wisely. 

Here are the main options:

  • Sole Proprietorship – The most common structure for small businesses makes no legal distinction between company and owner. All income goes to the owner, who’s also liable for any debts, losses, or liabilities incurred by the business. The owner pays taxes on business income on his or her personal tax return.
  • General Partnership – Similar to a sole proprietorship, but for two or more people. Again, owners keep the profits and are liable for losses. The partners pay taxes on their share of business income on their personal tax returns.
  • Limited Liability Company (LLC) – Combines the characteristics of corporations with those of sole proprietorships or partnerships. Again, the owners are not personally liable for debts.
  • C Corp – Under this structure, the business is a distinct legal entity and the owner or owners are not personally liable for its debts. Owners take profits through shareholder dividends, rather than directly. The corporation pays taxes, and owners pay taxes on their dividends, which is sometimes referred to as double taxation.
  • S Corp – An S-Corporation refers to the tax classification of the business but is not a business entity. An S-Corp can be either a corporation or an LLC, which just need to elect to be an S-Corp for tax status. In an S-Corp, income is passed through directly to shareholders, who pay taxes on their share of business income on their personal tax returns.

We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using ZenBusiness’s online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have. 

Step 6: Register for Taxes

The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN. 

Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.

The IRS website also offers a tax-payers checklist, and taxes can be filed online.

It is important to consult an accountant or other professional to help you with your taxes to ensure you’re completing them correctly.

Step 7: Fund your Business

Securing financing is your next step and there are plenty of ways to raise capital:

  • Bank loans: This is the most common method but getting approved requires a rock-solid business plan and strong credit history.
  • SBA-guaranteed loans: The Small Business Administration can act as guarantor, helping gain that elusive bank approval via an SBA-guaranteed loan.
  • Government grants: A handful of financial assistance programs help fund entrepreneurs. Visit Grants.gov to learn which might work for you.
  • Venture capital: Venture capital investors take an ownership stake in exchange for funds, so keep in mind that you’d be sacrificing some control over your business. This is generally only available for businesses with high growth potential.
  • Angel investors: Reach out to your entire network in search of people interested in investing in early-stage startups in exchange for a stake. Established angel investors are always looking for good opportunities. 
  • Friends and Family: Reach out to friends and family to provide a business loan or investment in your concept. It’s a good idea to have legal advice when doing so because SEC regulations apply.
  • Crowdfunding: Websites like Kickstarter and Indiegogo offer an increasingly popular low-risk option, in which donors fund your vision. Entrepreneurial crowdfunding sites like Fundable and WeFunder enable multiple investors to fund your business.
  • Personal: Self-fund your business via your savings or the sale of property or other assets.

Bank and SBA loans are a good option, but you may be able to attract funding from the USDA. You might also try crowdfunding if you have an innovative farming concept. 

Step 8: Apply for Licenses/Permits

Starting a farm business requires obtaining a number of licenses and permits from local, state, and federal governments.

Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits. 

You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more. 

You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.

This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.

If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.

Step 9: Open a Business Bank Account

Before you start making money, you’ll need a place to keep it, and that requires opening a bank account.

Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your farm business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.

Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account. 

Step 10: Get Business Insurance

Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.

Here are some types of insurance to consider:

  • General liability: The most comprehensive type of insurance, acting as a catch-all for many business elements that require coverage. If you get just one kind of insurance, this is it. It even protects against bodily injury and property damage.
  • Business Property: Provides coverage for your equipment and supplies.
  • Equipment Breakdown Insurance: Covers the cost of replacing or repairing equipment that has broken due to mechanical issues.
  • Worker’s compensation: Provides compensation to employees injured on the job.
  • Property: Covers your physical space, whether it is a cart, storefront, or office.
  • Commercial auto: Protection for your company-owned vehicle.
  • Professional liability: Protects against claims from a client who says they suffered a loss due to an error or omission in your work.
  • Business owner’s policy (BOP): This is an insurance plan that acts as an all-in-one insurance policy, a combination of the above insurance types.

Step 11: Prepare to Launch

As opening day nears, prepare for launch by reviewing and improving some key elements of your business. 

Essential software and tools

Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks. 

You may want to use industry-specific software, such as Conservis, Granular, or FarmLogic, to manage your workflows, inventory, crop times, invoicing, and accounting.

Accounting

  • Popular web-based accounting programs for smaller businesses include Quickbooks, Freshbooks, and Xero
  • If you’re unfamiliar with basic accounting, you may want to hire a professional, especially as you begin. The consequences for filing incorrect tax documents can be harsh, so accuracy is crucial. 

Marketing

Some of your business will come from the casual passerby or online visitors, but you should still invest in digital marketing! Getting the word out is especially important for new businesses, as it’ll boost customer and brand awareness. 

Once your website is up and running, link it to your social media accounts and vice versa. Social media is a great tool for promoting your business because you can create engaging posts that advertise your products: 

  • Facebook: Great platform for paid advertising, allows you to target specific demographics, like men under age 50 in the Cleveland area. 
  • Instagram: Same benefits as Facebook but with different target audiences.
  • Website: SEO will help your website appear closer to the top in relevant search results, a crucial element for increasing sales. Make sure that you optimize calls to action on your website. Experiment with text, color, size, and position of calls to action such as “Buy Now”. This can sharply increase purchases. 
  • Google and Yelp: For businesses that rely on local clientele, getting listed on Yelp and Google My Business can be crucial to generating awareness and customers. 

Kickstart Marketing

Take advantage of your website, social media presence and real-life activities to increase awareness of your offerings and build your brand. Some suggestions include: 

  • Signage – Put up eye-catching signage at your farm and website 
  • In-Person Sales – Offer your farm products at local markets, grocery stores 
  • Email marketing/newsletter – Send regular emails to customers and prospects. Make them personal. 
  • Start a blog – Start a blog and post regularly. Change up your content and share on multiple sites.
  • Paid ads on social media – Choose sites that will reach your target market and do targeted ads.
  • Payper-click marketing – Use Google AdWords to perform better in searches. Research your keywords first.
  • Influencer marketing – Pay people with large social media followings to promote your farm. You can find micro-influencers with smaller followings and lower rates.

Develop your website

Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism. They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google. 

You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech savvy, you can hire a web designer or developer to create a custom website for your business.

Focus on USPs

Unique selling propositions, or USPs, are the characteristics of a product or service that sets it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your farm meets their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire. 

Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your farm business could be: 

  • Organic produce and homemade foods straight from the farm
  • Fresh organic squash, locally grown
  • Organic hemp and hemp products – it’s the new superfood!
unique selling proposition

Networking

You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running a farm business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in farming for years and can offer invaluable insight and industry connections. 

The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in farms. You’ll probably generate new customers or find companies with which you could establish a partnership. 

Step 12: Build Your Team

If you’re starting out small, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for a farm business include:

  • Farm Workers – help grow and harvest crops
  • General Manager – ordering, scheduling, accounting
  • Marketing Lead – SEO strategies, social media, direct sales

At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need. 

Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent. 

Step 13: Start Making Money!

Farming offers a traditional lifestyle that can be very rewarding. Farming is critical to our survival, and to the economy. You’ll also be producing food that will always be in demand, and what could be better than living the farm life and making good money at the same time?  Now that you’re prepared with all the relevant entrepreneurial knowledge, it’s time to go find your piece of land and start building a successful farm!

Farm Business FAQs

How much does it cost to start a farm?

You may be able to start a small farm for about $80,000. You’ll need equipment and a down payment on a property. You may be able to find SBA loans or grants. Check the USDA website to see what options are available.

Can a farm be profitable?

Yes, it’s possible for even a small farm to be profitable. The key is to learn the business so you know how to produce the best food and to do so efficiently to keep costs low. Beyond profit, though, farming can be fulfilling work.

Do I need a license to start a farm?

You may need various business licenses and permits at the state and local levels. Check with your local governments for requirements or visit MyCorporation’s Business License Compliance page.

How can I learn to be a farmer?

The best way to learn is hands-on. You can be a farmer’s apprentice or volunteer to help on a farm in your local area. You could also go to an agriculture school in your area. Cornell University also has over 20 online courses for small farmers. Each course takes 5 to 8 weeks at a cost of around $200.