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Written by: Carolyn Young
Carolyn Young is a business writer who focuses on entrepreneurial concepts and the business formation. She has over 25 years of experience in business roles, and has authored several entrepreneurship textbooks.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on March 18, 2022
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
Here is what you need to consider when starting your farm:
Starting a farm has pros and cons to consider before deciding if it’s right for you.
Trends in the farming industry include:
Challenges in the farming industry include:
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.
You’ll need a handful of items to successfully launch your farm, including:
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| 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 |
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.
There are a few barriers to entry for a farm. Your biggest challenges will be:
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.
Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
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 bamboo.
This could jumpstart your word-of-mouth marketing and attract clients right away.
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.
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.
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.
Selecting the right location for your farm is crucial for its success. Look for a spot with fertile soil, access to clean water, and good drainage. Consider the climate and weather conditions in the area, as well as the topography and natural vegetation.
Additionally, assess the local regulations and zoning laws to ensure compliance and obtain any necessary permits. Depending on the type of farm you plan to start, you may also want to consider the proximity to markets, suppliers, and other resources.
By strategically choosing the right location, you can establish a profitable and sustainable farm that produces high-quality crops, livestock, or other products and stands out in the competitive agriculture industry.
Here are some ideas for brainstorming your business name:
Discover over 380 unique farm name ideas here. If you want your business name to include specific keywords, you can also use our farm 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.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
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!
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.
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:
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 an 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.
Choose Your State
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.
Securing financing is your next step and there are plenty of ways to raise capital:
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.
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.
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.
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:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
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.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using website builders. 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.
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.
Here are some powerful marketing strategies for your future business:
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:
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.
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:
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.
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!
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.
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.
You can’t start a farm with no money. However, you may be able to get funding through the federal government. You could look for applicable loans and grants on the USDA farm service website.
Oklahoma is one of the cheapest states for farmland. The state also has a good infrastructure to support operating a farm.
Dairy farming is very profitable because you can produce many different types of dairy products. Dairy farms also produce manure which can be sold for fertilizer.
Farmers can maintain soil quality through a variety of practices, such as rotating crops, using cover crops, reducing tillage, and applying organic matter and nutrients to the soil. Additionally, farmers can monitor soil quality through regular testing and work with agricultural experts to develop customized soil management plans.
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