A PRIMER for New Enterprises
Spring is often the time farmers examine their activities and consider the possibility of incorporating a new enterprise into their farm. Taking on new tasks and taking advantage of emerging opportunities in the market are often signs of a progressive farmer and many profitable opportunities do indeed exist, if one is willing to do a little homework and planning. Some enterprises, however, might lead to trouble. Something that worked for your neighbor may not necessarily work for you.
I would like to suggest a little 6 part primer that can serve as a first guide to help you consider whether or not you should take on a certain enterprise. Each point follows the letters to P-R-I-M-E-R. The idea you are considering should be able to clear each of these six hurdles.
First, is it profitable? Does it offer a decent profit potential compared to other enterprises you are producing or considering? How long will it take to turn a profit? Christmas trees, for example, may take many years before profits are realized.
Second, what resources are going to be required to make this enterprise a success? Can I use my existing equipment and facilities or are there going to need to be special investments? Are there special skills needed by me or my employees? Be as thorough as you can in listing what resources you are going to need and what it's going to cost.
The I is for information. Often information can be collected from other producers, your county extension office, and trade magazines and catalogs. Some enterprise have associations that make information available to members on a state or national level. Information on production, marketing, and management should be collected and organized for quick reference.
M is for marketing. Some enterprises have well established marketing channels. Others will require special effort to develop good customers. How involved will you have to be in the marketing activity? If it is a lot, are you comfortable dealing with people on a regular basis? What many find is that many of the more profitable ideas also require considerable marketing effort.
E is for enthusiasm. Is this an enterprise you are willing to hang in there with? In many cases, pride and determination are necessary ingredients for making an enterprise work. Temporary setbacks should be expected so you should take stock ahead of time of your enthusiasm for the enterprise.
Finally, you will need to assess the risks associated with the new enterprise. We all know farming involves risks from many different directions. Some risks that are production-related and can be managed by irrigation, genetics, spray programs or other good management approaches. Other risks, such as those related to marketing, can be addressed through contracts, planning, and relationship building. You should take a hard look at your financial situation before taking on a risky enterprise, especially on a large scale.
We have many farmers this spring that will be considering a new enterprise. Some I'm sure will find things working out better than expected. I would like to encourage you, however, to apply this PRIMER test before you make the leap and take stock of the enterprises profitability, get the necessary information, understand the marketing requirements, gauge your enthusiasm, and understand as best as you can the risks involved.
For More Information
For additional information, please contact, Tim Woods.