Joe Knows

Growing Greenbacks: How to Make Your Farming Profitable

Joe KnowsOf the more than two million farms across the United States, more than three-quarters produce gross annual revenues of less than $50,000. It's not surprising then that fewer than half of America's farmers name farming as their principal occupation, with most having another profession to supplement their income. However, with these tips you can make your farm profitable and grow your greenbacks.

Offer Accommodation

farmstay

Image via Flickr by Julie Gibson

Broadening your focus and offering accommodation to travelers keen to experience rural life is a great way to boost your revenue. More than 80 percent of Americans live in urban areas, so there are plenty of people who feel a country getaway is the perfect way to recharge their batteries and get back to nature. Spare rooms or barns can be easily converted into a bed and breakfast. Your guests may even be eager to help feed your animals and complete other basic chores.

If your buildings are full, you might convert part of your land into a campsite. You should provide a simple shower and toilet block, and consider providing electrical outlets to attract higher tariffs.

Depending on what you are growing, it might be possible to grow several crops at once and boost your revenue. For example, if your farm has previously only grown coconut trees, you could consider planting beans, courgettes, and cucumbers. These crops make use of the irrigation already in place for the coconut trees, so there's no extra effort required.

Take a Business Class

Too often, farmers spend so much time tending to livestock and soil management that other important aspects of farming, such as planning, analysis, and goal setting fall by the wayside. However, if you want your farm to be profitable then these business matters must be a higher priority.

A business class will give you the foundation you need to start thinking like a businessperson. It'll help you get a grip on your finances and teach you to assess the big picture. You'll also meet other business professionals who could help your farm grow.

In this modern age, taking a business class doesn't mean committing to hours in the classroom either. An online EMBA will let you structure classes around your lifestyle, making it easier to juggle your studies around your professional obligations. Online courses like these are ideal for farmers who are often based in rural areas, far from traditional brick and mortar educational institutions.

Sell at Farmers' Markets

Booking a stall at your local farmers' market is a great way to sell directly to consumers and raise awareness of your farm. Fresh produce is always appealing, but if you can offer different or unique products, such as specialty lettuces or unusual herbs, you'll have an edge over other stalls. Making up signs with buzzwords like "organic," "heirloom," and "free range" is another great way to attract crowds. Consider printing business cards or brochures advertising your farm and encouraging customers who love your products to order them directly from you.

Follow these tips, and you can beat the odds and turn your farm into a thriving business venture.

Surviving Tax Day on the Farm

Joe KnowsEach year, like every other farmer, I face a slew of tax codes that are difficult to navigate and estimate. The ups and downs of the seasons make predicting taxes difficult, but this year I did a few things differently that made it a lot easier when tax time rolled around.

Hiring My Kids

clover

Image via Flickr by WillowGardeners

My kids work hard on the farm, so paying them isn't a stretch. I want them to grow up with the family mentality that includes pitching in and not expecting to be paid for every chore, so the wages I pay can go toward their car insurance or into retirement or college funds. I can also deduct their farm clothing costs if it is something they need for their jobs.

In order to get a tax break and show reasonable expenses, I have to keep records of the work they've done. The IRS doesn't see a difference between me hiring neighborhood kids to help out or my own kids, so I choose to combine the values I'm teaching my own kids about hard work with the valuable breaks I can receive from the IRS when I invest money into my kids' futures. It's a win-win for us.

Really Understanding the Laws

It's important to understand the codes to avoid paying overly high taxes or facing an audit by the IRS for incorrect filing. If you are interested in learning about in-depth tax laws like I am, it might be worth it to take a few classes on the side to become a tax professional. The preparation will not only help you navigate complicated laws with your own farm, but help out friends and the surrounding community as well. 

Purchasing Equipment

equipment

Image via Flickr by basicbill

One of the important tax sections to really understand is the part on equipment deductions. Section 179 allows farms producing less than $400,000 gross annually to depreciate up to $108,000 of their equipment costs for that year. However, some farmers go overboard in purchasing unnecessary equipment to try to save on tax costs. Only buy equipment you really need and consider the most timely point to make that purchase during the year.

Considering All the Costs

This year I took careful notes on other farming costs I could deduct. Knowing how much I spent on electricity and insurance for the farm (not the house), for example, made it easy to deduct expenses from my profits. I have separate electric meters that help me know the usage difference between house and barns, but the IRS only requires an estimate of electricity used. I can also deduct my work phone, vehicle mileage and many other work-dedicated costs.

Understanding farming tax laws has made it easier to plan ahead and be in control of this year's expenses as much as possible. I won't be able to predict everything, but my tax knowledge has helped me make smarter farming decisions throughout the year that save me a lot of money in the long run.