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.
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| 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.
