Thanks to my travels, seminars and interactions with various industry professionals, I have a unique vantage point from which to observe emerging trends in American agriculture. Among today’s trends is the return of military veterans to agriculture. In addition, women and minorities are increasingly realizing the potential that agriculture offers to align with consumer demands and niche markets. With varying experience, these agricultural entrepreneurs are entering (or re-entering) the industry with renewed energy and creative thinking. In fact, even some of today’s traditional producers are seizing the growing opportunities to evolve their businesses in alternative ways, thereby increasing profitability as well as sustainability.
In a recent board meeting, these trends and their impact on the industry were on the agenda, and several members of these unique and emerging groups were in attendance. I was asked to provide some advice for these aspiring agricultural entrepreneurs.?
First, rely upon your outside experience to approach agriculture in creative ways. Whether it is exploring new markets, applying different techniques or re-strategizing business operations, do not be restrained by traditional mindsets. However, do not discount the advice and mentorship of experienced agricultural professionals either. Those who have navigated the conditions of issues such as positive and negative cycles, droughts and employees have valuable insight that can stabilize and anchor new thinking.
Next, before embarking on any enterprise, balance your passion with the logic of economics. This requires one to conduct some written business planning. And before assuming this will require a high-priced business consultant, stop to consider the benefits and ease of doing it yourself. For those who are looking for a little help, the Farm Credit University Ag Biz Basics online program offers a straightforward and step-by-step process to complete the following:
- Develop written short- and long-term goals for the business, family and individual. The goals are often bulleted and follow the S.M.A.R.T. principle (specific, measurable, attainable, rewarding and reasonable, and timely).
- Next, pencil-out monthly and quarterly cash flows. Specifically, estimate what you produce and then apply price and cost estimates to those production parameters. A simple spreadsheet is a good way to develop and think through different scenarios. Sometimes an existing operation that is similar to your vision can be a useful primer in planning.
- After thinking through different outcomes, tally up your assets, liabilities and debts. This will give you a good idea of your overall financial net worth. Be sure to check all available credit reports and scores.
- Finally, develop an income statement to summarize your cash flow and determine profitability. Along with this, it is important to develop a personalized family living budget that matches projected cash flow.
Including the online content, this process normally takes approximately five to 10 hours of your time. Yet, for today’s agricultural entrepreneurs, this effort is irreplaceable in successfully connecting experience with the growing possibilities of the land and agriculture. Many lending institutions are offering educational events and, in some cases, financial incentives for those committed to continued education and improvement. With the balance of creativity, experience, passion and logic, these aspiring men and women can help lead the industry into the future.
Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8 million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA, and regulators, as well as producer and agribusiness groups. He has published four books and over 1,300 articles on financial and business-related topics in journals, extension, and other popular publications.