8 New Ways To Generate Income From Your Farm
As a business owner, you know that the best plan of action is to diversify your income as much as possible. Keeping all of your eggs in one basket is usually not the best solution when you’re aiming for business growth.
Diversification is an important strategy in both investment and small business ownership. By incorporating a mix of products or services into your business, the ups and downs of individual product cycles can be balanced year-round. For farmers in Missouri and Iowa, having multiple balance sheets can provide opportunities for long-term growth in your farming operation and more money in your bank at the end of the season.
If you’re thinking about how to create new revenue streams for your farm or ranch, we’re here to walk you through several ways that you can enhance your current farming operation to boost your current income.
What is Diversification?
Diversification is about risk management, mixing a variety of investments and opportunities within a business portfolio. By spreading your investment across different assets, your finances aren’t solely dependent on one income stream and the potential high risk that brings.
For farming operations, this means doing more with your land than farming, which typically produce highly commoditized products. Adding new products and services, instead of shifting all of your focus into a single one, not only allows you to bring in additional revenue, but also provides the opportunity for expanding your customer base into a new market segment.
Be a Price Taker and a Price Maker
With much of your farm produce, it’s likely that you fall into the category of “price taker.” This is where you make a decision about how much of a particular product to make, but have very little say over the price of the product. Other farmers sell practically identical produce, meaning that you all individually have weak market power to dictate price changes.
A “price maker” though is able to control what pricing level they set their products and services at because there are no identical products on the market. While other farmers may have a similar product or service, it isn’t a close enough match to be considered a market-influencing competitor to your own.
The added benefit to being a price maker is that your business expansion can rise and fall along with market changes. When there is extra demand, you can choose to increase your supply (and prices). When demand falls, you can scale back on the supply and save your investments for times of higher demand.
As a small business owner with farms in Missouri and Iowa, plans for growing your business should follow the model of being both a price taker (with your standard farm produce) and a price maker (with new products or services). This is the best way to diversify your business and scale your operation sustainably.
If this is your first time adding price maker assets into your business plan, take a look at some of our examples for profitable farm ideas that you could implement.
Price Maker Examples
Vacation or Wedding Venue Rental
One of the most popular (and profitable) business trends for landowners is running a vacation rental or wedding venue on your farm. The tiny house vacation trend appeals to growing numbers of eco-conscious travelers, with their small footprint (which means less electricity and heating costs for you) and cozy vibes giving vacationers their own home-away-from-home.
If your farm or ranch is particularly picturesque, consider renting out space for use as a wedding ceremony or reception venue. Many couples are looking for a unique outdoor space to host their big day, with farms and gardens topping the list of popular venue types.
Create a dedicated space on your property, like a large barn with a standalone kitchen and bathrooms. Keep decor to a minimum to keep costs lower for you and to allow the couple to bring in their own vendors and suppliers. Depending on the season, you may be able to offer couples a farm-to-table dining experience for their wedding menu, with farm-grown fruit, vegetables, chicken, or beef.
There may be some renovation or building costs, so think about whether a small business loan to finance your farm expansion makes sense for you. If you’re unsure about your options, contact your local lender for advice.
Corporate Meeting Site
Large companies are often looking for meeting space for full-day or multi-day meetings and retreats that go beyond a meeting room with coffee, donuts, and boxed lunches. Just like with a wedding venue, you may have a barn or other outbuildings on your land that could easily be transformed into a corporate meeting area.
If you decide to go this route, make sure that the location has its own restrooms, electrical outlets (they’ll likely need several for projectors, screens, and computers), and WiFi capabilities. Furnish the room with a mix of meeting tables and smaller breakout areas with more casual options like couches.
How much you charge for renting this type of facility is up to you. Do your research to see what other successful farms in Missouri and Iowa are pricing their rentals at. If someone is willing to pay a particular price, there’s nothing stopping you!
Festival Host Site
Thanks to the pandemic, planning and executing a big event like a concert has become incredibly difficult. As a result, many event organizers have turned to outdoor venues to keep their guests and performers safe and mitigate the risk of cancelation or low ticket sales.
Festivals have become increasingly popular and typically require little more than an open field from the farmer’s perspective! Promoters and organizers will usually arrange all of their own equipment from staging and seating to restrooms and food vendors.
Do you have some extra storage space that neighbors could use? If so, consider renting out a barn to a fellow farmer looking for equipment storage, either on a temporary or long-term basis.
Time is money, but so is space! The U.S. Census Bureau reports that self-storage revenue has increased by more than 50% in the last decade, from $7 billion in 2010 to over $14 billion in 2020.
Horse Boarding Service
Similarly, if you have stables or pastures that local horse owners could use, think about renting out these facilities to the equestrian community. Many can’t afford, or simply don’t have the land, to keep their horses at their own homes, so finding boarding is high on their list of priorities.
But it’s not just horse boarding that you could offer on your farm or ranch. With horse ownership comes other needs, like bedding and feed for the animals. If you’re already set up to do so, you could offer straw and hay to your boarders, along with storage of feed and grooming supplies in a secure barn.
Sawmilling or Firewood Splitting Service
For properties with a large number of trees, adding firewood or sawmilling services could be a lucrative venture. You’ll likely need to take out a small business loan to fund the specialist equipment needed for this, but both firewood splitting and sawmilling can be worked on year-round.
Hardwoods like cherry, oak, and ash make beautiful fireplaces and are prized materials by woodworkers. Softwoods like pine, fir, and cedar are best for construction or outdoor firepits. Offering custom cutting services for these woods allows you to increase prices beyond supply-only.
Your township, county, or borough likely has practices to limit waste in the community and find greener alternatives. Composting leaves, brush, and table scraps is one of the best ways to be more eco-friendly and keep trash out of landfills.
Offering composting services to your local authority, or even individuals, can bring in additional income. This compost can then be used by homeowners, resold at the hardware store, or taken back by municipalities to fertilize land and improve soil health.
Have space for a small greenhouse or barn on your ranch or farm? Think about setting aside some room for growing microgreens. This can be very profitable, particularly if your property is located near a city or the immediate suburbs where high-end restaurants exist in higher numbers.
Microgreens can be harvested in as little as 7 to 10 days under a controlled light source, so they grow much quicker than traditional crops. Restaurants and hotels use microgreens in their cooking, so this fast growing time means that you can supply these vendors all year long. This is another market where you can set or heavily influence your own prices, making it the perfect choice for business-savvy farmers.
Make Extra Income From Your Property
Keep the financial wheels of your farm turning with new products and services this year. At BTC Bank, we’re here to support Missouri and Iowa farmers as you build thriving farming operations within our communities. Speak with one of our lenders to discuss financing options for growing or diversifying your farming business today.