Over the years I have seen many sideline businesses come and go, and mostly gone. There were elk, ostriches, bed and breakfasts, handicrafts, baking, making cheese, and so on and so on.
From time to time I get this question: What kind of business should I or could I set up on my farm that would bring in some cash money yet not tie me down too much? Over the years I have seen many sideline businesses come and go, and mostly gone. There were elk, ostriches, bed and breakfasts, handicrafts, baking, making cheese, and so on and so on. Hey, I’m not saying farmers shouldn’t start businesses on their farms. I am saying be very careful before you spend a lot of time and money starting a sideline business. Why?
A few reasons: One, the mental energy required to set up a business can take you away from running your farm properly. Second, often it takes up front capital that might already be short.
Next question: How are you going to find customers? And finally, what are the long term prospects for your proposed business if it works? And is there any salvage value if it does not work?
And on a larger scale: Is buying dairy quota or buying another quarter section of land the best thing for your farm? OK, I know a lot of farmers who have sideline businesses and they make them work. But I know a lot of other farmers who spent a lot of time, energy and money thinking of a business, spending start up money, and the businesses did not work.
As you know, a lot of farmers spent or invested a lot of money into a herd of cows and related equipment or into part of a hog
barn and now are losing money or have shut down the business. And a lot of farmers are chasing that next kilogram of milk quota, or the next quarter section of farmland, just to take on more work and more debt.
I suppose adding another kilo of
milk quota isn’t such a big commitment. And if you’re already farming 5,000 or 10,000 acres another 160 or 320 acres isn’t such a big deal. However, there are other things to do with one’s money, time and brain power.
As you know I have been encouraging farmers who read Grainews to learn how to make money with stocks since around 1986. And many farmers have set up their five-legged stool financial strategy since I brought it out in 1993.
So now let me explain how I believe stocks can fit into a farmer’s life. Suppose you are what some call a big farmer. You spend over $1 million a year on fertilizer and seed. As I have written before, this is an irreversible decision. There is no going back once the seed and fertilizer have dropped out of the air seeder. Now suppose you set aside $100,000 and