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Monday, December 15, 2014

Anything is possible.


As we wrap up our 2014 farm business management experiences, and look to 2015 and beyond – we may consider expanding something we already do, or we may explore a new enterprise. We may even transition to something outside of agriculture.

Our farm business choices are only limited by our imagination!
It is important to keep in mind that “anything is possible!”  Examples easy to recall when emphasizing the openness of potential markets include; 1) bottled water, 2) pet rocks, and 3) gourmet dog treats.

Sticking with the family-companion theme, let’s examine the potential of moving up a marketing channel. I’ll focus on simple hard wood here.

            1,000 board feet of pallet grade hardwood = $240
This same wood as firewood = $580
            Same wood as 1 cubic foot bundles of firewood = $2,760
            Same wood as hamster houses = $2,121,400

Maybe an overly simplistic example, but you get the point – anything is possible. The challenges revolve around actually making a profit with whatever it is we decide to do.

My preferred process for gauging the probability of success for expanding or starting a business is summarized here:

What is the objective?
Can you describe to me (very briefly) what it is you are going to accomplish?

Start at the end
            How much net income would it take to call this effort worth while?

As we develop budgets and project revenues let’s remember some concepts from economics:
Cash costs
            People that operate out of a check book only use this method. If they can pay the input bills they believe they are successful.
Accounting costs
            Folks that use accepted accounting methods to manage their business recognize there are costs other than cash when gauging profitability.
Economic costs
            It may also be meaningful to consider our opportunity costs. I’m not the sharpest spoon in the drawer, but I could work as a laborer somewhere in town and forego my farm income. Am I content with the trade off?

Feasibility
Sure, anything is possible, but is it feasible? I can make all the hamster houses I want. Is it reasonable to assume I could sell them?

I do believe our opportunities are only limited by our imagination! However, the risks are great and we must be considerate before we bet all our assets on a new venture.

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