When Farming Reality Doesn't Match the Business Plan

When Farming Reality Doesn't Match the Business Plan

Summary

The objective of the Adjust 2015 Project has been to increase the knowledge and awareness beginning farmers have of potential difficulties they may face, to create realistic, nimble and flexible business plans for new and beginning farmers, to increase skills of new and beginning farmers to recognize dangers on the farming horizon in time to make adjustments and to prepare a proper exit strategy for new and beginning farmers.

After one year, we have designed the protocols for the data collection phase of the project and we have completed 90 percent of the surveys, and about 30 percent of the interviews.  We will be developing and rolling out curriculum over the next 8-12 months.

Objectives/Performance Targets

Preliminary findings from SFA Adjust 2015 project show strong need for curriculum around facing the challenges of farming

The Sustainable Farming Association, with support from Renewing the Countryside and The University of Minnesota, is releasing preliminary data as a result of the Adjust 2015 Project, funded by NCR-SARE, the Sustainable Agriculture Research and Education program.

Initial survey results indicate there are significant differences between the livelihoods people expect their farming will be able to provide and what it actually does provide, emphasizing the importance of flexibility and foresight in farm planning.

• About 71 percent of respondents intended their farm business to provide a full-time income

• About half of respondents (54 percent) make less than 25 percent of their net income from the farm, and 33 percent make less than 10 percent of their net income from farming

• About 69 percent of respondents are not satisfied with their farming income

• About 62 percent of respondents are not able to pay salary or wages to themselves and family members working on the farm

• About 75 percent of respondents have changed their goals since they started farming

• 63 percent of respondents did not have a formal business plan when they started

• About 75 percent of respondents reported that their original business plan did not accurately predict their farming experience, while 18 percent rated their plan as “not accurate at all”

Survey participants revealed a wide range of training backgrounds – with a recurring emphasis on the difficulty of becoming adequately prepared for the challenges of farming:

• When asked about preparations for farming, 34 percent of respondents indicated they had no formal training prior to farming, while 20 percent chose a self-directed approach to educating themselves, by reading agricultural literature and attending conferences and workshops. About half of survey respondents grew up on a farm (51 percent). Of those who pursued post-high school education, about 34 percent of respondents majored in an agriculture-related program.

• When asked how successful they feel about certain aspects of their farm operation, the majority of survey respondents consider themselves not very successful at being profitable, managing costs and expenses, and adequately insuring their farm and farm business. The majority of survey respondents also feel they are not adequately prepared to farm and dissatisfied with their financing arrangement. When asked how challenging certain aspects of farming are, the majority of respondents indicated that the process of transferring the farm from or to someone else is a significant challenge, and they have experienced at least one significant setback that was particularly challenging.

Survey respondents reported a range of interesting surprises encountered in their first 3-5 years of farming:

• “The land, climate, and market really influence what we do more than what we ‘want’ to do.”

• There’s a huge time investment (on things they didn’t think would take as much, like bug/weed control), leaving less time for other things (like travel) than expected

Many found farming more complicated than imagined, or more stressful, or just more work, with a slower pace of progress toward goals and larger hurdles than it was possible for people to envision:

• “Because I grew up in the city, my idea of what farming was going to be like was very romantic. I had no idea that there was so much formal business involved. I thought farming was only planting and harvesting – I didn’t realize all the planning that was involved.”

• “Did not know that this would challenge every facet of our brains, emotions, intelligence, and body strength.”

• “It wasn’t easy to predict the day-to-day activities of running the farm, especially in the context of working alongside another farm.”

• “It is the myriad of little failures, the realization of your own limitations and lackings and the attempt to try to control so many unwieldy things with never enough resources that can pile up and be a little overwhelming sometimes and bring a bitter edge that I think many farmers struggle to ward off.”

• “Wears the body down pretty fast.”

• “It took a lot longer to make progress than I originally thought it would. The farm was always undercapitalized, and improvements have been made very gradually as I was able to afford them.”

• “Being able to implement all the ideas a person has. In my daydreams and notebooks there are plenty of great ideas that will save time and energy and money and be innovative and work really slick. But there is that disappointing reality that kicks in every now and then, whether it’s because there is no time to try something out, lack of foresight, lack of ability to do, or it just plain doesn’t work in practice.”

• “The reality of how hard it is to take on all that (we planned/dreamed) and to build our business from the ground up has been a little bit of a shock. I admire people who have gone before us and set up great farm businesses, especially the people who have done so without a partner. There are just so many hurdles to get over when starting a farm business.”

• “We wanted to have an established farm with all the bells and whistles the first year! The reality is that that ideal set us back financially, and we learned that you can’t hurry up time or control the weather.”

• “Time allowed us to get a better feeling on how to lay out the pastures, the buildings. If we would of did everything the first year, we would have made mistakes in the location of some of the buildings. By doing it over time, we could actually see how our land would react as we added buildings.”

• “I greatly underestimated my start-up expenses. I had a lot of trouble finding suitable land that I could afford. I had to buy bare land, I had to borrow money from my parents because no bank would touch me with a ten-foot pole, and I don’t know if I’ll ever be able to afford to build a house on the farm. I wanted to be independent, but I’m extremely dependent on my partner and parents, financially and for farm labor.”

As you can see from these quotes and from the following ones, a recurring theme had to do with how difficult it is to make a profit on a small scale, given the costs and expenses involved, the likelihood of lower production than expected, while at the same time higher levels of labor and equipment than expected are needed:

• “Income projections were way too high. We did not have a clear idea of the labor

• required to achieve the income goal.”

• “Inputs (feed) are much higher than planned.”

• Cash flow is challenging: “I was amazed to discover the disparity between work and ability to make money.”

• “My understanding of how much I need to grow or sell to make a living from the farm is still lacking.”

• “The marketing was challenging because of the uncertainty in successfully producing enough vegetables to meet promises.”

• “Financially – It seems very difficult to make a “living wage” on the farm. So far, it has been necessary to have outside jobs to provide cash to invest in the farm (equipment, construction, etc.).”

• “We way overprojected our farmers market sales but have closed the gap with CSA shares to keep overall sales within line of our projected totals. The margins have been a little thinner but the business is still operating at about a 23 percent profit margin.”

• “Lower yields and higher costs.”

• “Our labor expectations and milk production on grass where way too optimistic. The business plan had us making money, very good money, after Year Three. That did not happen.”

• “Most of the rest of the details, as far as projected production and income are far below what I had hoped. I call it my ‘business plan fairy tale.’ It was a nice story with a happy ending but it is not reality. I just had no idea. What do you put on the piece of paper when you have no idea? I was not able to find good statistics to make accurate projections.”

• “Realizing we needed way more equipment and help than we thought we would – we’d thought of a lot of things but being there and doing this make us realize there was SO much we did not know, not coming from a farming background.”

• “Dependent on other people’s departure from ordinary paradigm, and slow development of alternate reality/agenda; trend of local food hopeful, but now I am old.”

A few additional themes illustrate the findings so far

Marketing is more challenging than expected, consumer demand lower than expected:

• “I had been more optimistic that consumer demand would help develop side farm operations into full operations, which would then give consumers the consistency that they have grown to expect from conventional food. Without stable demand, or an established local distribution system, I don’t feel that I’m able to invest more in my operation.”

Social isolation (no time and different way of thinking):

• “Socially, it can be very isolating. You can get together at conferences on rare occasions and bond with others that are going through what you are going through, but getting along with those that are not in farming can be difficult. They just don’t understand what you are going through. It is just very isolating. Those that live in a community that is large enough or of the right type to have a community of organic farmers are very lucky.”

Changes in factors out of people’s control can drastically change levels of success:

• weather events (late/early frost, floods, etc)

• changes in labor (family vs. hired)

• stray voltage

• animal health (disease, death)

The care needed for decisionmaking was surprising to many, and how drastically seemingly small details make a difference on end results (breed, flock/herd size…) – and in many cases where changes were needed, transitions were much harder than expected; strong relationships and verbal agreements were not enough.

Despite these challenges, a handful of farmers were surprised that they are doing better than they thought they would, how much their operation grew, and how successful it was. They never dreamed it would be as big of an operation as it is.

Accomplishments/Milestones

The project enjoys a high profile within SFA work and is complemented by a branded identity that will carry forward beyond the life of the grant.

• SFA Adjust 2015

Impacts and Contributions/Outcomes

The Adjust 2015 Project hosted a preliminary data review at the 2014 SFA Annual Conference on Feb. 8, 2014.  Participants in that review indicated the need for more information, and were looking for more outcomes.  As this was only a preliminary report, the outcomes were not yet completed.  We continue to be very encouraged by all the input we have received and by all those who have indicated the need for this project.

Collaborators: