In working with farmers, I’ve found that the most common growth strategy is ‘more’ – more land, more yield, more livestock. But I’ve also seen the growth strategy of bringing in something ‘different.’ The farm manager decides to add a side business because of a desire for a new challenge, to better spread out income sources, or even out of necessity – if there’s a need for growth but no conventional means of getting ‘more.’
I break ‘different’ into two categories: related and unrelated lines. Related lines are already connected to what you do on the farm, like grain hauling, seed sales or tiling work. Unrelated lines are businesses that don’t have anything to do with farming – car washes, gas stations, non-farm trucking and so on.
A client recently shared his experiences with me about starting side businesses. He’s started many different ventures, and some – like his seed business – have become very successful. He often wonders about the negative impact new opportunities can have on his core farming business.
I’ve seen that type of unwanted impact play out in one farm operation. There, the complexity of the labor, assets and cash flow of three separate, yet related businesses created the illusion of success. But after it all played out, the comingling of the three businesses made it very difficult to know exactly where profits and losses came from. Ultimately, the farm would have been more successful with all of its eggs in one basket – and keeping a close eye on them.
Here are some questions to ask yourself about a potential new venture:
Is there a problem that needs to be solved? Maybe this goes without saying, but it’s not hard to fall in love with our own idea. The market ultimately decides if our idea has any merit.
What is the ‘cost’ to my core business? Anything you decide to do means there is something else you are deciding not to do. Don’t let distractions keep you from doing your main thing well.
Regardless of the pitfalls, a side business can be a great way to add income or a family member to the farm as well as an opportunity to learn new, valuable skills.
Can I be passionate about helping people with that problem? There may be a lucrative opportunity to start a manure-hauling business – but if I hate the thought (and smell) of the business, I’m not going to have the enthusiasm to make it great in the long run.
How different are the skills needed than the ones I have? Skills can be learned, but I need to know what my new business would require to be successful. If it requires customer service and I have no experience or interest in dealing with the public, I’ll quickly become frustrated with what the business demands of me.
Do I have a ‘growth’ mindset? Starting a new project requires grit and a desire for learning along the way. If you aren’t interested in growing and taking on new challenges, business obstacles will be tough to overcome.