What makes someone change careers to agriculture? Some folks take up farming to leave the business world behind with its focus on finance, but they soon learned to reshape their expectations. Operating one’s own farm is basically running a business, with all the related fiscal responsibilities. In fact, obligations for farmers are more costly and complex than for other small business owners.
Buying Starter Stock
Starting a farm from scratch requires a lot of upfront capital. First, there’s the matter of land, deciding whether to buy or lease from somebody else, and how much you can afford. Then, you must purchase the seed for crops you wish to grow and/or animals to rear. The quantity of stock needed to turn a profit is tied to what the acreage can support based on size and soil fertility.
Procuring Parts and Labor
Besides stock, considerable sums must be set aside for down payments on implements and equipment. Gone are the days when everything can be done by hand with your trusty toolkit, wagon and plow.
Modern farm machinery is expensive and complicated, but also necessary on any amount of land large enough to be profitable. A new tractor commonly costs at least $50,000, and a combine harvester ten times that. That’s not even counting operations and maintenance costs.
If all this isn’t enough, farmers frequently have to take on hired hands to help with labor. Many get by paying workers seasonally during harvest time, but intensive and large-scale operations demand a permanent workforce of farmhands.
Safeguarding Your Operation
Between stock and machinery, you have significant investments to protect. You need insurance to cover your cattle and crops.
Crop yield insurance protects against poor harvests due to crop damage from natural disasters, while crop revenue insurance cushions sellers from the worst of the produce market’s natural volatility. As for animals, livestock mortality insurance shields owners from losses caused by their cows being stolen or killed under most conditions. Furthermore, any full-time workers you hire will likely want employee health insurance in case of injuries, which in agriculture are always possible.
The upshot of all this is that you’ll be making many intricate and important financial decisions. It’s critical to keep track of every transaction for your own records and for Uncle Sam’s. Only by being good with money can farmers stay in the government’s good books and live off the land for another year.