Adding something new to your farm or rural business can be exciting. Maybe you’re considering an agritourism experience, a value-added product, a farm store, or a new service.
But before you jump in, take a step back and ask: Is my business ready for this?
A new enterprise can create new opportunities for additional revenue and new customers, but it also brings new costs, responsibilities, and challenges. Thinking through the idea now can help you make a better business decision and avoid costly surprises later.
For example, imagine a Kentucky produce farm that sells at farmers markets and is considering adding fall agritourism activities, such as a pumpkin patch, farm tours, or weekend events. Before investing, the farm should work through a few key questions.
1. Is there a market for it?
A good idea isn’t necessarily a good business opportunity. Start by determining whether enough customers are interested in what you’re offering.
Ask:
Who is my target customer?
What do they want or need?
How much are they willing to pay?
Are similar businesses already serving this market?
How will customers find me?
For our example farm, this includes looking at other agritourism businesses within driving distance. Are families looking for fall activities? Could the farm attract school groups, tourists, or local organizations? What are other farms charging and offering?
The goal isn't necessarily to be completely different. It’s to understand the market and find where your farm fits.
2. Does it fit with what I already do?
The best new opportunities don't always require starting from scratch. Look at what you already have (your land, equipment, products, facilities, skills, and customer base) and think about how you can build on those resources.
Consider:
Can I use resources I already have?
Does this complement my current products or services?
Could it help me sell more of what I already produce?
Does it fit with my long-term goals?
Will it take time away from an enterprise that is already working well?
Our example farm might already grow pumpkins, have scenic property, sell directly to customers, and have a loyal farmers market customer base. Those existing resources could help the farm create a new experience while introducing visitors to other products.
3. Do I have the capacity?
Growth requires more than a good idea. You also need the capacity to operate it successfully. Consider whether you have the time, labor, management capacity, and facilities to make it work.
Think about:
How much additional time will this take?
Who will manage it?
Will I need to hire employees?
Do I have enough space and equipment?
Will it overlap with my busiest season?
This is especially important when adding seasonal enterprises. A fall agritourism enterprise might sound like a good fit for a produce farm, but fall may also be harvest season for other crops you're growing to sell.
Who will run the farm while you're greeting visitors? Who will manage parking, admissions, activities, and customer questions? Will family members be able to help, or will you need seasonal employees?
Don't forget to count your own time as a cost. Your time has value, too.
4. What will it cost and how will I pay for it?
Start putting numbers to what the new enterprise will require. Depending on your idea, costs could include:
Equipment
Buildings or renovations
Inventory and supplies
Insurance
Permits or licenses
Marketing
Technology
Labor
Look beyond the obvious expenses. An agritourism business might also need parking improvements, signage, fencing, seating, restrooms, handwashing stations, admission systems, or additional maintenance.
Once you have an idea of the total investment, consider how you'll pay for it including business savings, loans, grants, or a combination of funding sources.
If you're considering a grant, don't build your entire plan around receiving one. Grants have specific eligibility requirements, allowable expenses, match requirements, and application timelines. Start by clearly defining the project and developing a realistic budget, then look for funding opportunities that may fit.
5. How will I make money?
Knowing what an enterprise will cost is only half of the equation. You also need to understand how it will generate enough revenue to justify it.
Think about:
What will I charge?
How many customers or sales will I need?
What will my profit margin look like?
How long will it take to recover my initial investment?
Are there opportunities for additional sales?
For an agritourism enterprise, revenue doesn't have to come from admission alone. Our example farm might charge admission while also selling pumpkins, produce, baked goods, or prepared food. It could offer paid activities such as hayrides or workshops or host private events.
Looking at the whole customer experience can help identify ways to increase sales while giving visitors more reasons to stay and return. What else could customers purchase while they’re already doing business with you?
6. What could go wrong?
Every new enterprise comes with some risk. Thinking through potential challenges ahead of time can help you be better prepared.
Consider:
What if sales are lower than expected?
What if costs are higher than expected?
What if I can't find enough labor?
What if equipment breaks down?
What happens if bad weather affects the business?
Are there insurance, regulatory, or liability concerns?
How will this affect my cash flow during slower months?
Weather is especially important for agritourism businesses. A rainy weekend could significantly affect attendance at an outdoor fall event. Having a plan for cancellations, refunds, alternate activities, or other weather-related challenges can help protect the business.
7. How will I know if it's working?
Before launching, decide what success looks like. Your goals might include:
A certain amount of additional revenue
A target number of customers
A specific profit margin
A certain number of events or bookings
Gaining new customers
Increasing sales of existing products
Be specific enough that you can measure the results.
For our example farm, success might mean attracting 1,000 visitors, generating a certain amount of additional revenue, or increasing sales of farm products to agritourism visitors.
Then, after the season or launch, look at what actually happened. Did enough customers come? What did they buy? How much did it cost to operate? Which activities were popular? What would you change next year?
Those answers can help you decide whether to continue, adjust, expand, or discontinue the enterprise.
Start with a Good Plan
Business growth isn’t simply about getting bigger. The goal should be to build a stronger, more financially sustainable business.
Before investing in a new enterprise, take time to evaluate: The market. The fit. Your capacity. The cost. The revenue potential. The risks. The results.
Whether you're considering agritourism, a new value-added product, direct sales, or another enterprise, a good business plan can help you work through the idea and make a more informed decision.
Have an idea for a new enterprise but aren't sure where to start? KCARD can help. Our team works one-on-one with Kentucky agricultural and rural businesses on business planning, market development, funding opportunities, and other business needs. Reach out to us at kcard@kcard.info or 859-550-3972 to get started!