Make Your Farm More Profitable
October 4, 2019
While farming isn’t our forte, helping small business owners is a top priority here at Bounds Accounting & Tax Services. By approaching your farm as we would a more traditional business, we can help you find ways to become more profitable and efficient. Today, far more goes into farm management than planting, harvesting, and other elements of agriculture. Not that those aren’t important! But if you really want to turn your farm into a sustainable business, you should be prepared to take the following steps.
Create a Business Plan
Even if your family’s been farming for years, it’s not too late to create a solid business plan. Think of this as your roadmap to success—except you get to draw it on your own. In creating a business plan, you really have to consider who you are as farmers, what you hope to accomplish in the future, and how you can realistically achieve your goals. This entire process might help you realize that you need to change directions in order to move forward. Or that your calculations are slightly off. As you work through these obstacles during the planning phase, you’ll save yourself a lot of time and stress out in the field.
Plus, a well-developed business plan is a key element for securing financing today. If you need a loan to fund future farm machinery or infrastructure, then you’re already one step in the right direction. Even if you’re not planning to apply this year, it’ll be much easier to tweak an existing business plan than it will be to start from scratch when you need it.
Research the “Right” Crops
If planting and harvesting are essential to your daily operations, then you need to be selective about your crops. Much as you wouldn’t open a business without carefully researching the market, you should apply that same approach to farming. Avoid planting the same crops year after year simply because that’s the way it’s always been done. Or because all your neighbors have had success with similar harvests.
While your soil composition and climate will play important roles in determining your exact crop(s), don’t forget about the concept of market saturation. If you and all the other local farms are growing the same crops, then when it comes time to sell your produce you’ll also be competing in the same market. In bountiful years, this causes market saturation. Which means, you’ll have to drop prices in order to stay competitive. But that hurts your overall profitability.
Spare yourself (and your neighbors) from this dilemma by researching all your options. Maybe you’ll have better luck with specialty crops that grow in your particular climate. Either way, don’t be afraid to get out there and network! By building relationships with potential customers and suppliers, you can tap into a new market before you even start planting. Leading to a more profitable farm in the future.
Improve Your Accounting Practices
To know what works well for your farm (and what doesn’t), you need solid facts and figures. Before you implement your newly completed business plan and research results, we recommend that you review your current accounting practices. Have you been accurately documenting your annual expenses? And calculating your profits and losses each year? Make this entire process a little easier on yourself by overhauling your accounting now.
Of course, you don’t have to do it alone. At Bounds Accounting & Tax Services, we love working with local farmers! Together, we can develop systems that allow you to track your expenses, maximize your deductions, and really see how well your business is doing from year to year. Having more money is only one measurement. If we can really pinpoint where it’s coming from, you can continue to make your farm more profitable in the future. Along with increasing your efficiency and cutting unnecessary costs elsewhere. We’ve been helping farmers throughout Central Maryland and Southern Pennsylvania improve their accounting practices for nearly a decade. Let’s talk more about what we can do for you.