Budgeting Tips

Tips for Starting a Farm Business

how to start a farm business

Exciting news! 

As of last week, J&R Pierce Family Farm is no longer just J&R Pierce Family Farm – we are now J&R Pierce Family Farm, LLC.

Those last three letters may not mean a lot to you, but for us, they are something to be proud of. We have spent the last year or so toiling hard on our farm (and at our other day jobs!) and staying awake at night trying to figure out the best course of action for our business. 

For us, having a farm was never really the same thing as “homesteading.”

I know a lot of the readers of this website do, in fact, identify with the homesteading movement, so I want to mention that I have zero problems with that. In fact, much of what my husband and I do on our farm actively supports our own lifestyle. 

From canning to raising chickens for the dinner table to growing our own vegetables, most of our enterprise is double-edged in that we raise food for our own consumption and to sell to others.

It was the last portion of this equation that made us decide to designate our farm as an official business. I’ll get into the details as to why as I write this article, but I thought it would be helpful to walk you through our specific process.

Not everybody will follow the same timeline – and that’s ok. But here are some tips for starting a farm business (as well as to help you narrow your focus and clarify your vision as you are doing so).

how to start a farm business

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Practice for a Few Years First

There are many different schools of thought on this, but I personally wouldn’t want to start any kind of business without knowing what I’m doing first. I think that’s doubly true for a farm business of any kind, where there are all kinds of outside variables that can screw up your success even if you’re really good at what you’re already doing. 

When we first bought our property, it was with the goal of growing a garden, maybe raising a few chickens (25 at first). The next year, we expanded to add a few pigs, and since we really only needed one for ourselves, we decided to throw in a couple extra to raise for our parents. 

The next year, those three pigs morphed into six, and those 25 chickens morphed into 70 that we hatched out of our own incubator

And in the most recent year, the chickens grew to a flock of more than 100, the pigs became a party of 10, and then we added sheep (first five, then seventeen). Oh, and we also built a hoophouse!

We gained a lot of experience in those short three years, learning quickly what to do and what not to do. We made a ton of mistakes and we didn’t make any money – in fact, upon doing our tax return this year, I found that we actually lost money – to the tune of several thousand dollars.

But that’s ok, because we both have other jobs that are responsible for paying the bills. 

I would like to mention that neither of us is a spendthrift in the slightest. We are frugal to a T, repurposing what we can and scrounging here and there to find resources that we don’t have to pay for. 

The bottom line is that starting a farm is expensive, both in terms of financial capital, infrastructure, and intellectual capital. It takes some time to build up enough experience to launch full-bore into a business. Make sure you know what you are doing! 

Figure Out What to Sell

how to start a farm business

Once you decide that you’re ready to jump into starting a farm business, you need to determine what you are going to sell. 

There are a couple of parts to this. 

I don’t recommend trying to get your hands involved in everything. Have you ever heard the phrase, “jack of all trades, master of none?” There’s a reason for that. Spread yourself (and your resources) too thin, and you’re not going to come out on top.

We started our farm enterprise with eggs, first selling to a few family members and friends before expanding to a local restaurant (which, conveniently for our business, is also owned by a friend). 

Although we sold pigs before we officially decided to become a business, the goal here was not to profit at all but simply to offset some of our expenses while raising our own pig. Pigs get lonely, and it makes sense to raise half a dozen if you’re going to raise just one, anyway. 

You can sell whatever you want, but it pays to crunch the numbers. I recommend keeping good records the year before you decide to form a business. You can make your own spreadsheets or log books or even use one of these premade forms, like this egg collection chart I made.

Log everything, from expenses to payments received. This way, you’ll know exactly how much it costs you to produce one egg. 

Think carefully about your time, too. You might be able to make $200 from selling a pig, thinking all you have to spend on it is what it costs to feed and house it, but when you calculate your daily chores hauling feed and water out to the pig barn, that $200 isn’t going to seem like very much. 

Make sure whatever you are going to sell is profitable, and that it’s worth your time. I would love to start a business selling green beans (they’re easy to grow and cost me very little money and time to do so) but I’m not going to fetch a lot of money for a pint of beans in my area – too much competition. 

Similarly, I could get a lot of money selling honey from our beehives. In fact, we did sell honey for a couple of years before our business took a bit of a turn. However, both my husband and I discovered that we are allergic, so tending to the hives turned into a nightmarish experience that had us popping Benadryls for several days after.

So…not worth our time. 

Do what makes sense for your farm, and your preferences. If you don’t like raising chickens, don’t raise chickens! 

After we expanded the egg sales, we began selling pork and then lamb to the restaurant and a few other non-family and non-friend customers. As soon as we started selling to the restaurant, we realized we were playing with fire, in a sense. 

Which leads to my next point…

Decide What Kind of Business is Right For You

how to start a farm business

As soon as you start selling farm products to people outside of your inner circle, you open yourself up to potential liability (depending on who is in your inner circle, you might be already exposed to some liability  – but that’s a topic for another day!). 

We weren’t worried about selling eggs and pigs to our family and friends for two reasons. One, we are extremely close with all the people we sell to, and so the likelihood of them suing us if anything went wrong (which of course it never has) is slim. 

Second, we weren’t selling eggs at a high enough volume to have to worry about USDA regulations. Our pork was processed custom exempt, and we sold the entire live pig to our customers instead of by the hanging pound (which meant we could legally skirt many of the USDA regulations in this regard, since our customers paid the butcher directly for their processing). 

Once we branched out to the restaurant, though, a whole new world of liability opened up to us. We stayed awake at night worrying. What would happen if somebody ate one of our eggs and got sick? Yes, some of that liability could come back on the restaurant – but it could also come back on us. 

We decided that, for both tax and liability purposes, it was time to organize ourselves as an official business. 

There are a few types of business structures you can choose from. We chose to go with an LLC, since it offered the greatest level of protection and financial convenience for us personally, but there are several avenues you can explore. 

I’ll give you a brief description of each type below, but it’s best to chat with an accountant or an attorney about which one would be the best (tax- and legality-wise) for your business.

LLC

An LLC Is a business entity that operates separately from its owners. An LLC can purchase property and sell property apart from its owners and is also responsible for its own liabilities. So if we were to get sued, the LLC would get sued – and not us personally. As a result, many of our personal assets (like our house) would be protected. 

LLCs are fairly simple to form, although you will need to pay filing and other administrative fees. We went through a lawyer for ease and simplicity, so we had additional legal fees to pay, too. However, an LLC is easy in that you can draft an operating agreement so you don’t need to hold formal meetings. Plus, it is flexible and the structure can change at any time.

Sole Proprietorship 

Sole proprietorships are less expensive with LLCs, but you will be taxed as a self-employed person.  There is no annual required paperwork or state filing, but you’ll receive no liability protection and it can be tough to obtain funding (or build credit for your business).

DBA

A DBA lets a company transact business using a different name. It’s pretty basic to register as a DBA because it usually takes place only at the county level (though some states do have DBA filings, too). 

A DBA does not have the same compliance requirements of forming an LLC, and lets a company transact business with a new name. 

Partnership

A partnership is the easiest way for multiple more people to own businesses. There are limited partnerships and limited liability partnerships. You can find more details on both here

C Corp 

A C corp is a bit more complicated in that it protects the owner’s assets from creditor claims. Whenever you incorporate your business, you are automatically a Corp. You will be a separate taxpayer with income and expenses taxed to the business and not the owners. 

Corporations can make their own profits and be held legally liable. They pay income tax on their profits, unlike LLCs, partnerships, and sole proprietors. In some cases, profits can be taxed twice.

S Corp

An S Corp allows you to take advantage of pass-through taxation. It is flexible and allows you to set salaries for employees and a greater flexibility of accounting methods. Employees can own shares of the business, too. 

B Corp 

Often referred to as a benefit corporation, a B-corp is a for-profit corporation recognized by most, but not all, states. These are taxed in the same ways as C corps, but are driven by both mission and profit. You’ll need to submit annual benefit reports that evidence your contribution to the public good in some states. 

Close Corporation

Close corporations vary between states, but this title is often held by small companies seeking a less traditional corporate structure. They are usually run by a small group of shareholders without a board of directors.

Nonprofit Corporation

A nonprofit corporation is organized to do some work that serves the greater good, such as education, charity, literary, scientific, or religious work. These organizations are usually tax-exempt and don’t pay state or federal income taxes on their profits. You have to register with the IRS to be tax-exempt. If your farm has an education- or research-based mission, you may be able to pursue this option.

Cooperative

Cooperatives are owned and operated by and for the benefit of people using its services. Usually, profits are distributed among the members, and the cooperative is run by an elected board of directors and officers. 

What’s Important to keep in mind for all of these business structures is that they aren’t just designated for business and legal reasons, but also as tax statuses. It’s uncommon, but an LLC can be taxed as a nonprofit, an S corp, or some other type of business – therefore, it’s important to meet with a lawyer and an accountant (and potentially a certified financial planner) as you’re moving through this decision.

Search for Financing

how to start a farm business

If you don’t already have the facilities and materials you need to start your farm business, the next thing you need to consider is where, exactly, the money is going to come from. 

Since my husband (my co-partner in the LLC) and I work jobs outside of the farm, we are able to supplement most of our needs with the little bit of income we have left over from our other jobs. However, for larger expenses, we’ve had to seek some outside assistance.

I recommend researching all of the grants and loans that are available to small farm businesses. If you aren’t sure where to start, I recommend looking here. This will give you a good idea of grants, loans, and other awards available in your area and for your specific type of farm.

Obtain Any Necessary Permits or Licenses

how to start a farm business

Local and state laws vary when it comes to licensing and permitting, but it’s worth checking in to your area’s laws before you begin to establish your business. You also need to check that your zoning is appropriate. 

At the very minimum, you will likely need to register your business name (an attorney can help with this), buy a business license, obtain an employer identification number, and carry some kind of liability insurance on your product.

Speaking of insurance – it’s not mandatory, but it’s a good thing to have when you’re in the business of selling farm products. See what’s available, both in terms of liability insurance as well as insurance on any losses you might experience on the farm. 

Figure Out Your Market – and Marketing

I thought about moving this tip earlier in the article because marketing and your personal market are so important when it comes to starting a farm business. 

You can’t sell a product if you have nobody to sell it to. It could be the most beautiful product in the world! But if there’s no demand, you’re not going to make any money.

Make sure you are selling a product for which there is local demand. If there isn’t local demand for what you are trying to sell, is there a way you can get to a broader market? For example, we decided to sell a few tanned Icelandic sheepskins that we had processed after last year’s harvest. 

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We know good and well that there is zero market for that good in our local area. So, we are selling it on Etsy.

Do your research, and come up with a marketing plan. The most common reason why small businesses fail isn’t that they are offering an inferior product-  it’s that nobody knows about the product. 

Whether your plan is to make your own business cards or design a website, have something in mind. Start small and add more tactics and materials as you branch out.

Is a Farm Business Right For Me?

how to start a farm business

Before you decide to begin your own farm business, the most important thing you need to decide is whether you are ready – and willing – to take your farm from a hobby farm to an actual, up-and-running business. 

For me, that’s the difference between homesteading and farming. I think homesteading has elements of farming – and having a homestead is not necessarily the same thing as a hobby farm.

However, when you’re ready to take your farm business to the next level, you may have to forego traditional homestead values like only raising heritage chickens (they don’t mature as quickly, which can affect your profits) or only raising heirloom tomatoes (they sell well, but only if you have the right market). 

At the end of the day, none of these things is wrong. You just need to decide what kinds of sacrifices you are willing to make – and if owning a farm business is right for you. 

What other tips do you have for starting your own farm business? Let me know in the comments!

Want to learn more about farming? Be sure to check out these articles!

Subscribe to our email newsletter for regular tips and tricks on homesteading – wherever you are. You can also follow us on Instagram (@jrpiercefamilyfarm) and Pinterest (J&R Pierce Family Farm) for frequent updates. Happy homesteading!


Author: Rebekah Pierce

I'm a writer and small farm owner, and lover of everything outdoors. I'm hoping to share my passion for farming, gardening, and homesteading with you on my blogging journey.

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