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Monday, August 18, 2014

Starting a New Farm Business? Minimize Your Risk by Joining an Incubator

By Juliette Enfield
Penn State Extension Educator, Warren Co. 


You dream of being a farmer. You love working outside, growing your own food, and being your own boss, but then reality sets in. The time commitment, the loans, and the pressure to produce suddenly make starting a new farm seem like a crazy idea. The statistics aren’t on your side either. The Small Business Administration estimates that 54% of small businesses fail within the first 4 years. Some of the reasons for this high failure rate are insufficient start-up capital, lack of managerial experience, and lack of business planning. Business incubators can help an entrepreneur to develop managerial and business planning skills in an environment where the initial investments in the business are lower. According to the National Business Incubator Association, 87% of businesses that have graduated from incubators are still in existence today (NBIA, 2014).

Incubate your business for the first few years for a better chance of success.

Incubators provide services for a start-up business including mentorship, rental space and equipment, business planning assistance, easier access to start-up capital, lawyers and accounting services, secretarial services, and networking opportunities. The concept of the business incubator has grown in popularity in recent years. In 1980, there were just 12. Today there are over 1,250 (NBIA, 2014). Incubators foster many different types of businesses including technology, service, and manufacturing. Incubators are usually non-profit organizations which receive funding from grants and donors to stimulate business growth in local economies. Typically, businesses stay in incubators for 3 to 5 years until they are able to successfully run their business on their own.
There are incubators that are specific to farming. These incubators offer many of the same services as the multi-purpose incubator as well as rental space for land and equipment. Farmers who participate in these incubators have full or part time jobs off the farm to supplement their farm income. This allows them to gradually transition into full time farming, if they find that their business is successful. There are two farm incubators in Pennsylvania, The Seed Farm, located outside of Allentown, and the Horn Farm Center for Agricultural Education, located near York. The Seed Farm is for vegetable production using organic methods and Horn Farm is for vegetable and fruit production using organic methods.
The Seed Farm offers a farming apprenticeship program and an agricultural business incubator. New farmers at The Seed Farm are currently required to complete the 9 month internship before participating in the incubator. There is a cost associated with this apprenticeship and there is also an application process. This apprenticeship covers farm management training, tractor training, marketing experience, and business planning. The mentoring continues after the apprenticeship from a full time farmer who works at the incubator. The incubator program offers rental space of 1.5-3 acres at a low rate, which is gradually raised to the real market price after 2 years. Farmers in the incubator have access to shared farm equipment by paying a relatively small fee every month. They also have access to a greenhouse, cooler, and storage space. These farmers have their own insurance and business licenses, and market their own produce. They meet with the farm manager regularly to discuss their business plan. The Seed Farm is in its fifth year, currently has 2 farmers in the incubator and 1 graduate, and would like to expand the program. More information can be found at www.theseedfarm.org.

Aspiring new farmers working at The Seed Farm. Photo credit: The Seed Farm.

Horn Farm Center for Agricultural Education offers a farm incubator program where you can rent as small as 1/8th of an acre to 2 acres at a low rental rate. To use the farm tractor, farmers pay $25 an hour instead of immediately investing in a $20,000 tractor. As with The Seed Farm, there is a full time farm manager who works on the farm and there is a business planning committee that meets with the incubator farmers regularly to discuss their business planning. Horn Farm is in its fourth year and currently has 4 farmers in the incubator. For more information about Horn Farm, see their website at www.hornfarmcenter.org.
As with other business incubators, farm incubators have multiplied across the country as well. In 2010 there were just 38 and now there are over 125 (NIFTI, 2014). Sometimes after participating in an incubator program, farmers decide that farming is not for them, which is also a valuable learning opportunity. If Horn Farm or The Seed Farm are not located near you, you could benefit from the business incubators that are located in your area of Pennsylvania. Business incubators are located throughout the state and are usually affiliated with a university or local municipality. The National Business Incubator Association has a comprehensive listing of incubators across the country which can be found at: www.nbia.org/links_to_member_incubators.
If you are already successfully farming and you are thinking about making an incubator a part of your farm, the New Entry Sustainable Farming Project out of Tufts University and the National Business Incubation Association have some great resources to help you get started.

Sources for this blog:

Scarborough, N. Effective Small Business Management: An Entrepreneurial Approach. Prentice Hall. New Jersey. April 2011. 10th Edition.

1 comment:

Rex abrah said...

Vision and Values:
A farm is both an extension of the vision and values of the individual(s) who start(s) it, and it has to be carefully planned to make sure that it fits within that vision as well as within the particular confines of the place where it is established.

Place Matters:
Direct market farms typically aren’t well suited for the rural heartland, and rice farming is not going to be successful on the arid plains of Eastern Washington. These are extreme examples, but there are important subtleties to every market and every plot of land.

Planning:
New farms need to have a well designed business plan that takes into consideration individual infrastructure and financial needs, the viability of marketing strategies, and the farmer’s production capacity and knowledge.

Education and Experience:
Preparation, knowledge, and training are essential. But so is being able adapt quickly to the unexpected, to persevere when factors beyond one’s control conspire against you, and knowing how/when/what/where to expend time, energy, and resources.

Managing risk:
It is helpful to plan careful to manage risk through diversification, financial management, and the ability to withstand a couple of bad years.

Start small:
For most beginning farmers, we advise starting small to allow time for details to be worked out, for additional learning to occur, and to mitigate the size and scope of problems that will inevitably arise.

REX From
http://www.bizbilla.com/