Owning a family farm is a dream for many people. One of the most difficult aspects of farming is passing down the farm to future generations. As tax and business laws continue to change, it is getting difficult to develop succession planning with family farming. Successful farming plans require a lot of research and work on the front end. As agriculture continues to get conglomerated, there are a lot of small farms struggling to make a profit. Designing your farm for success over time is essential to passing it down to future generations.
Economies of Scale
One of the biggest issues that farmers have to deal with is economies of scale. This is an economic concept where larger companies have an advantage over smaller ones because they get better prices on goods and services. This makes it difficult for small farms to compete over time. Over time, many small farms lose out to larger ones. It is vital for farmers to plan out their finances to avoid this if they want to keep the farm in the family.
Working Capital
Owning a farm takes a lot of capital. In the beginning, buying the land and equipment is a lot more expensive than many people realize. Anyone who wants to invest in their farm needs to make sure they have the working capital to do so. Although many banks will lend the money, this is a huge debt payment for farmers to deal with. Adequate financial resources in the beginning goes a long way with having success in this area of the farm. If you have interest in learning more about farming, contact us today.
