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The backyard (mini) farm gains its first economic advantage through growing enough food to reduce family food bills. During the first two years of mini-farming, it is likely that the family will use all that can be produced. But in the third and subsequent years, it is quite possible to both reduce food bills and sell enough food to replace a job when the two economic aspects are added together . Growing enough food to reduce food bills is easy, but the idea of selling produce looks like a bear at first glance. And, certainly, it is a bear if you anticipate trying to persuade the local branch of an international conglomerate supermarket chain to buy your products. It is unlikely to work, and even if it did, it would be a bad idea because you'd be positioning yourself in competition with global corporations using massive economies of scale and below market rate labor, so you wouldn't make any money.
It is important to understand that just as there are areas in which a mini-farm is at a disadvantage compared to agribusiness, mini farms have notable strengths that provide a competitive edge as well.
The hottest agricultural niche right now is organic produce. The organic label has caught on to such an extent that even major department stores are offering it. The problem is that along with this positive interest in chemical-free produce, major corporations have gotten into the act and have started to squeeze the small farmers out of the market.
But all is not lost. Large-scale agribusiness organics suffer from many of the same problems as conventional produce--especially problems associated with shipping long distance, picking produce before it ripens, and selecting varieties for shipping characteristics rather than flavor . This is where the small farmer has an insurmountable edge over the competition, because the small farmer can specialize in varieties selected for taste and provide naturally ripened produce that hasn't lost its nutrient content from sitting in a warehouse for two weeks.
Locally grown organic heirloom vegetables and herbs are extremely attractive to locally owned superettes, convenience stores, restaurants, and natural food stores, not to mention the neighbors! There are other advantages that come from the fact that mini farms operate on a small scale. A mini-farmer can talk to the owner of a local health food store or restaurant and strike a deal to grow specific crops. A large warehouse can't do that. The mini-farmer can also grow labor-intensive crops that resist automation and where the attention of the farmer can net a superior product. In addition, specialty crops can be selected. Specialty crops, like purple potatoes or exotic lettuces, make no sense at a large agribusiness scale but will find a ready market through farm stands, local stores, and restaurants. The "Biggest Little Farm in America" uses this approach to earn $238,000 on just 1/2 acre of land.
Considering all of this, it is no surprise that the number of small farms is increasing at a rate of 2% per year and is likely to continue increasing at that pace for as long as the next 20 years! Sales to stores would, of course, be at wholesale rather than retail price. This cuts the profit margin but has the advantage of a ready market. Restaurants and neighbors-through delivery to the restaurant or setting up a farm stand-represent retail pricing. The downside is that getting business from restaurants can be difficult, and farm stand sales are uncertain, but the benefit in terms of higher profit margin merits consideration.
Folks who are likely to consider mini-farming may have difficulty seeing themselves as salespeople, but selling your produce is very different from other sorts of sales. First, you are selling something you have created with your own hands and in which you have pride.
Second, you are selling something of incomparable quality. Finally, instead of trying to create an artificial need, you are selling something that everybody needs already. As a result, it is something that can be approached with a sense of personal integrity in the spirit of a truly mutually beneficial transaction.
Approaching a local restaurant owner or the proprietor of a small health food store is not difficult because you already have something that these folks want: superior vegetables from a local supplier. There is marketing and public relations value in using vegetables from a local source, and local produce has superior taste and nutritional quality because long-distance shipping is avoided.
The key is simply to present a proposal that eliminates risk on the part of the owner while advancing mutual benefits.
The largest risks for the local restaurant and health food store are lacking supply when it is needed and purchasing goods that either cannot be sold or would hurt their reputation. This latter concern is allayed by providing samples and consistently delivering the highest-quality goods. The first concern requires a little thought.
As a single small farm, a mini-farm doesn't have the scale to protect against crop losses, freak hail storms, and the like. In spite of the best intentions, a mini-farmer really can't promise unfailing supply. Likewise, a restaurant or store of even small size would sell far more produce than a mini-farm could supply in the best of seasons. The solution is to make it clear to the customers that the
intent is to provide no more than 20% of their needs, so their current relationships with larger suppliers remain intact. In this way, you will be able to sell all that you can produce, and your customer has no risks. This straightforward technique works extremely well.
Organic and Certified Naturally Grown
Organic produce grown without chemical insecticides, fungicides, or fertilizers commands a premium price about 40% higher than conventional produce. It therefore stands to reason that organic production should be strongly considered simply from a marketing perspective, not to mention for the health aspects
The use of the term organic to refer to food products is regulated by federal law under the National Organic Program. The gist is that if the gross income from produce is less than $5,000 annually, a farmer can use the term to refer to products as long as they are truly grown using the standards of the program. If the gross income is greater than $5,000, then significant fees apply for certification, and a great deal of paperwork is required. The fees are generally on a sliding scale-meaning "the more you make, the more they take." A mini-farm is likely to start out making less than $5,000 in gross sales yearly, so using organic labeling from the beginning is perfectly feasible; once that threshold is crossed, the funds for certification can be considered a cost of doing business. Even at that, it pays to shop around for a USDA-accredited certification agency whose fees don't gobble up all the profits! Many state departments of agriculture are accredited by the USDA, and this is the least expensive route.
An alternative to the expense of the National Organic Program is Certified Naturally Grown, a voluntary program that follows the same guidelines but has no associated fees. Certified Naturally Grown is oriented toward small local producers and features rigorous inspections offset by streamlined paperwork requirements.
My own farm has been Certified Naturally Grown.
Taxes and Accounting
It should go without saying, but I'll say it anyway because it is important: Keep all of your paperwork, receipts, and so forth in order , and file your taxes properly on time. It is possible that by following the rules, you actually make minimal money after accounting for expenses, but it all must be properly accounted for or you'll ultimately have an unfortunate encounter with the IRS. There are a number of special deductions and rules applicable to farmers, and the IRS has a Web site dedicated to explaining these.
Outside of tax matters, careful accounting is important to your bottom line. As a small business, you need to know what you should be growing because it earns you a profit and what you should stop growing because it is losing you money. The only way to do this is to keep track of your income and expenses down to a crop-by-crop basis.