The current agriculture economic cycle could be described as one with pinched margins and attempting to avoid the “knockout punch.” Others find tough economic times are an opportunity to launch and grow the business as some decide to exit the industry. Recently, at one of my speaking engagements during the winter speaking tour an interesting question arose, “Do you have any recommendations on diversifying the farm and ranch?”

Consider underutilized assets

First, assess your resources. Could diversification allow you to leverage your equipment, machinery, and facilities to reduce the fixed cost per unit? For example, custom work or feeding livestock could generate income from underutilized assets. However, be cautious when embarking on new business ventures. Will the potential customer pay on time and how will a new enterprise impact extra costs such as repairs or timeliness in your business strategies and actions? Monitor your accounts receivable to avoid becoming your customer’s unsecured banker, particularly now during the stressed part of the agriculture economic cycle.

Maybe a side gig?

Many young and beginning producers are finding outside gigs as a source of income and a networking opportunity. Word-of-mouth can be a powerful marketing tool to establish and expand markets. When one is engaged off the farm, it also provides the chance to observe the practices of others, both good and bad.

Time management

Time management must be considered in the operational plan of diversification and how it fits into the demands of the existing business. The work-life balance is often overlooked, particularly as children and grandchildren become part of the equation. Some producers have solved this issue by including their children or grandchildren in new enterprises and allowing them to gain the life skills that agriculture and entrepreneurship experiences can bestow. A time management rule is to keep productive work at less than 2,800 hours per year. For example, if the main operation requires 2,500 hours, then only 300 hours would be available for side ventures. In the long run, exceeding these guidelines often results in deterioration of the business, family, and personal life and can lead to burn out.

Finally, develop your business, personal, and family goals in writing before diversifying or committing to a “side gig.” Will the new venture become a stopgap or a bridge over the profit and loss canyon? Is it a stepping stone for asset and wealth accumulation of land, equipment, and capital? Can the new venture utilize the talents of the individuals involved? In my travels I have learned that there are many creative ways to diversify farm and ranch operations and monetize the many talents of agricultural producers.