1. Can I Make It Pay? Chuck Schwartau Regional Educator – Livestock cschwart@umn.edu

2. Purposes This program was put together to address common questions from people considering new enterprises for their small acreages or farms in southern Minnesota Assist with business planning Help avoid pitfalls of entrepreneurship Increase awareness of resources available

3. Audiences Small Farm University –Program designed to help small land parcel owners explore business enterprises that may be appropriate for themselves and their families –Included many urban residents considering purchasing rural properties –Audience proved to be true small acreage owners (<10 acres) and owners of larger properties looking to add enterprises to their farms

4. Audiences Local Foods – 3 rd Crop Producers’ Meeting –An offering of the Rural Advantages Program designed mainly to help farmers explore additional crops to diversify beyond the typical corn:soybean rotation found in much of southern Minnesota

5. Points to Ponder Purpose of your business/enterprise Assets you have at your disposal Skills you possess Availability of resources Labor necessary and available Marketing your product Budgeting Miscellaneous

6. What is your purpose? Is this a business or a hobby Do you want to make a profit or simply cover most of your expenses? Is this intended to replace full or part-time employment by an individual? Is the expectation to recover some of the cost of owning a parcel of property?

7. Reality Hits! Five out of ten new businesses fail within 5 years. --Small Business Administration For some types of businesses, the rate is closer to nine out of ten that fail within 1 year!!

8. Why Do Businesses Fail? Lack of Experience Insufficient Capital Poor Location Poor Inventory Management Over-investment in Fixed Assets Poor Credit Arrangements Personal Use of Business Funds Unexpected Growth --Small Business Management, Michael Ames

9. Why Do Businesses Fail? Competition Low Sales --Do It Yourself Business Book, Gustav Berle

10. Assets Available Personal –Discipline to put in the time and effort –Self-starterSelf-starter

11. Assets Available –or do you need a push?need a push

12. Assets Available –Spare time? Need to make time? –How much time is necessary? –Seasonal or year-around? –Time off? –Impact on your family?

13. Site or Facilities Buildings and land base –Use existing? –Build new?

14. Equipment or Tools Equipment necessary –Do you have it now? –Do you need to purchase some? New or used?used –Can some be rented?

15. Skills Utilizing existing skills –Possess some reasonable skills? –Over your head?Over your head?

16. Skills Developing new skills –Technical –Manual –Marketing –Customer service

17. Labor Your own labor Family labor –Are they as sold on it as you are? Outside labor –Availability –Cost Legalities of being an employer

18. Is There a Market? Is it something others use or will want? Uniqueness of product or service Price differentiation Geography/travel routes Population Selling on site or delivering to a marketplace Salesmanship

19. Now here was a salesman!

20. Summary of Questions to Ask What ag interests do I have? What resources are available? Can I afford to produce what I want? Will the farm support what I select?

21. Summary of Questions to Ask How will I establish, manage, harvest, store or feed my selection? Is there a market for my product? Is there a knowledge or support base? Will there ultimately be a profit?

22. A Beach Tale A couple lived near the ocean in a house with a view of the beach. One summer they noticed a girl who was at the beach pretty much every day. She wasn't unusual, nor was the travel bag she carried, except for one thing; she would approach people who were sitting on the beach, glance around furtively, then speak to them. Generally, the people would respond negatively and she would wander off, but occasionally someone would nod and there would be a quick exchange of money for something she carried in her bag.

23. The couple assumed she was selling drugs and debated calling the cops, but since they didn't know for sure they just continued to watch her. After a couple of weeks the wife said, "Honey, have you ever noticed that she only goes up to people with boom boxes and other electronic devices?" He hadn't and said so. Then she said, "Tomorrow I want you to get a towel and our big radio and go lie out on the beach. Then we can find out what she's really doing.“ Well, the plan went off without a hitch and the wife was almost hopping up and down with anticipation when she saw the girl talk to her husband and then leave. The man walked up the beach and met his wife at the road. "Well,? Is she selling drugs?" she asked, excitement pouring out with her voice.

24. "No, she's not." he said, enjoying this probably more than he should have. " Well,? What is it, then? What does she do?" his wife fairly shrieked. The man grinned and said, "She's a battery salesman.“ "A battery salesman?", cried the wife. "Yes," he replied "She sells 'C' cells by the sea shore!"

25. Support Systems Suppliers of inputs Is further processing needed? Is shipping necessary? –In or out Service for your systems Distribution system

26. Moral of the Story? Product people want Provide the product they want when they want it Provide the product they want where they want it Customer service

27. Budgeting Partial budgets –FinBin (http://www.finbin.umn.edu/)FinBin –Iowa State budget page (http://www.extension.iastate.edu/agdm/livestock/html/b1-21.html)Iowa State budget page Be thorough –Use your business plan outline –Be conservative on income and liberal on your costs, it will avoid some of the nasty surprises later

30. Budgeting Finpack (http://www.cffm.umn.edu/)Finpack –Financial planner Balance sheets Enterprise budgets Whole farm projections Cash flow –Free trial version can be downloaded

31. Legal Items State registration of business –Sales tax? Employment items –I-9’s –Withholding – state and federal –Unemployment insurance –Workers’ compensation

32. Legal Items General liability insurance Product liability insurance Personal liability for business Wind/fire/hail for the business, not just the residence Risk insurance? –Consider this if you embark on a high value ag product with significant input costs

33. Back to the Farm Develop a business plan –It makes you think about what you want to do and asks the questions often forgotten when starting a business –AgPlan.umn.eduAgPlan.umn.edu

34. On the Upside of Your Small Business While there are many reasons to not start your own business, for the right person advantages can outweigh the risks You will be your own boss You will benefit from your hard work rather than someone else benefiting A new venture can be exciting Running a business provides endless challenges and opportunities for learning --Small Business Administration

35. Resources for Small Farms Small Farm Funding Resources - USDA –http://www.nal.usda.gov/ric/ricpubs/small_farm_funding.htm#ORGhttp://www.nal.usda.gov/ric/ricpubs/small_farm_funding.htm#ORG Family & Small Farms – USDA –http://www.nifa.usda.gov/familysmallfarms.cfmhttp://www.nifa.usda.gov/familysmallfarms.cfm ATTRA – USDA –http://attra.ncat.org/http://attra.ncat.org/ Small Farms – U of M Extension –http://www.extension.umn.edu/SmallFarms/http://www.extension.umn.edu/SmallFarms/

36. Resources for Small Farms National Small Farms Conference – USDA –http://www.conferences.uiuc.edu/conferences/conferenceviewer2/vi ew.cfm?conf=20033http://www.conferences.uiuc.edu/conferences/conferenceviewer2/vi ew.cfm?conf=20033 Farm Service Agency (www.fsa.usda.gov)www.fsa.usda.gov

37. Most Typical Audience Responses “We’d like more information about budgets” “Where can we get more information on livestock enterprises?” “Where can I get more help on business planning?”

38. Questions?

39. Thanks for your kind attention Chuck Schwartau cschwart@umn.edu