I work off the farm as a small farms extension instructor. Last Wednesday, I held a class for small farmers on financial planning, bookkeeping and recordkeeping. As a farmer and business person, I learned so much from this class, especially the signs or red flags that give you a strong idea whether or not your business is succeeding. One of our biggest challenges with this new farm business of ours is figuring out how to be financially solvent in the next year or two. Starting a farm business takes a tremendous amount of capital expense to get started, especially on the infrastructure side. Financing these capital expenses is tricky unless you have unlimited amounts of capital at your disp0sal, which we didn’t 2 years ago when we started this enterprise. We took on an incredible amount of credit card and loan debt in order to get rolling and while we had a really sucessful year financially last year (beyond our financial expectations actually), we still haven’t begun paying down the debt associated with the business. I learned at Wednesday’s class that there are particular equations that will show me our debt ratios (in terms of looking at our assets vs liabilities) to tell me whether we are doing well or not. I’m still improving our bookkeeping and recordkeeping system, but I hope to be able to interpret these ratios by year’s end. What really resonated with me at this class was the fact that if you can’t pull yourself out of debt within 2 to 3 years, then you will probably go out of business within 5 or 6 years. This gave me a much needed dose of reality. Time to get our finances together! It really is too bad that the government isn’t investing in new small farms by helping out with more subsidization and grant funding for small farms. Instead, we continue to subsidize the ever growing corn production, which is leading us to unhealthier diets and disastrous farming practices. Doesn’t really make any sense. I hope our new administration will consider looking at agricultural issues in a new way. Needless to say, one our big goals this year is to pay down some of that start-up debt that we have accumulated. Let’s hope we can meet this goal with our increased markets!
On a more positive note, we have been participating in a state program through Mercy Corps Northwest in which we have set up an Individual Development Savings Account that will help us pay for some of our major equipment costs. Last year, we put away $150/month for six months saving a total of $1,000 by December. As a result, the state is matching the $1,000 savings with a $3,000 grant. This $4,000 will go directly to Kubota Corporation for our very expensive, financed tractor and rototiller. We won’t have to make payments for two years! It is a great program, but unfortunately, with the state’s budget crisis, IDA matched savings programs were cut way back and Mercy Corps has stopped accepting applications. I’m glad we participated when we did, but hope the state can reinvest in this program in the future to support all the new farm businesses that are popping up all over the state.
Josh spoke yesterday at the local Weston Price Foundation chapter meeting about our CSA and poultry. Many of our farmers’ market customers were there, so it was fun to see them and get excited for the farmers’ market season ahead of us. We’ve been really getting into the Nourishing Traditions way of eating around here, so it was fun to go to the meeting and learn new things about nutrient dense foods and eating in a nourishing way. One way we have been incorporating the “traditional” ways of eating is by cutting sugar out of our diet. We’ve done pretty good so far. Almost two months and we’ve had very little sugar except for raw honey once in awhile and maple syrup. We made an exception last night when we went out on our Valentine’s date and had chocolate cake and mousse with dinner. Yum! We are also trying to cut out the soy part of our chicken’s diet. Josh is making progress on that front. Anyway, it was so nice that there is so much support for local farmers from the members of the WAPF chapter!
We’ve had a bit more snow and rain up here the last couple of days, so the pond is nice and overflowing. This week we are trying to get the last of the hoops up on the hoophouse as well as catching up on our greenhouse seeding. The greenhouse is already full. We have to start putting overflow into the coldframe. I don’t think we were ready with how we were stepping up our production this year in terms of greenhouse space. Now, we have another project for next winter — a new and bigger greenhouse! When we get back from the Small Farms conference and the Breitenbush organic growers’ conference next week, it will almost be time to break new ground and start planting the first round of radishes, turnips, peas and all the other greens that are ready to go out in the field. Here we go!
Good post…it’s amazing how capital intensive it is to get a farm up and running. Our biggest lesson was that when something isn’t working, cut your losses and go with what is profitable. While I miss the broilers, layers, and pigs (the sheep, not so much), ending those enterprises was a big financial step up for us.
Hey,
Sounds like a great class you held/took (I couldn’t understand whether you were a student/teacher/host). Who taught the business class, and what was the actual title of the class? Sounds like a short, sweet, and informative one.
I’m going to nursing school at the moment, and planning to work in this field for a couple of years in order to raise farming funds. I can’t imagine throwing myself into farming without significant start up funds. I’m super happy to hear that you’re making it work for you!
Congrats!