hey folks! a friend of the family suggested to get a tax number and start up a small farm because of all of my berry, fruit and nuts i have on my property. 35 varieties and cultivars 63 total. I’m planting to sell my extra at the local farmers market. I’m hoping to try and offset the costs buying and maintaining my plants and costs of chicken feed. any other tips or advice that you folks that have farms, might have for a newbie farmer just starting? I’m also looking for land to expand from the 1.5 acres i have now. can pm me if you wish.
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very good read! thanks! our accountant said the same but this makes it more clear.
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If your INTENT is to try and make a go of a fruit farming operation…you can deduct expenses and turn in income. (Often the expenses will be greater…especially in early years.)
As for the IRS frowning if you have a loss…not too likely the first three years…and you can overcome their frowns if you have sufficient evidence of expenses and operate like a business (instead of a
hobby).
I used to operate a tax and bookkeeping business before I let the first ex wife have what she wanted of it. (lol)
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i intend to not only make a go but expand on the business with a land purchase. nothing so big i have to hire employees . only big enough for my wife and i too handle.
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Here are a couple of things than seem obvious but most growers don’t appreciate when they first start:
Its going to be more difficult and time consuming to sell your fruit than you expect.
Its going to cost more money to grow the fruit than you expect.
Also, it would be wise to set up a separate checking account for farm use only so that you never co-mingle your personal money and expenses with your farm money.
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we already set up a checking account just for the farm. once i get the land. i plan to do cane fruit which doesn’t require much to grow. considering the stores around here sell rasp./ blackberries from mexico at $4 a half pint i don’t think i will have a problem selling them once the words out. a local veg. farmer grew and sold some fresh strawberries at the local farmers market last summer. i watched people buy 20 pints at a time from him. he was sold out by noon. i told him my plans and he told me people ask him for berries all the time and wished he had cane fruit to sell. I’ve been contemplating this for many years. it seems that bush fruit give the most return for the least investment in time and money… i do want to do some hazels and butternut but bush and cane fruit will be my primary products.
Good you have a dedicated checking account because that is something the IRS wants to see.
We have grown Blueberries and Blackberries for a long time. Both have high profit potential and are easy to grow compared to tree fruit based on my experience.
Its pretty easy to over estimate the potential revenue from each but we have found its easy to hit about 1/2 of the potential which is still a lot of dollars per acre (12k poundsX$3/lb X.5 = $18k/acre for blackberries PYO). It does take a lot of time to pick the fruit if you are selling at a farmers market, roughly 1 hour per 12 pint flat. Raspberries take a little longer and we packed them in 1/2 pints but packed black and blue in pints. I understand customers buying multiple pints at a time. We used to have a special price on a purchase of a whole flat of berries and lots of folks bought a flat each week. Basic refrigeration like a cool-bot will allow you to pick fruit every day and store it until it can be sold at a busy Saturday market. PYO works great and significantly reduces picking labor if you can attract enough customers to the farm. We used to sell PYO and multiple farmers markets but now sell everything PYO where we are only open 10 hours per week.
Good luck on your new adventure. It should be a lot of fun and with some luck and hard work, it could be very financially rewarding too.
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thank you Rick for your words of wisdom and encouragement. this is something I’ve wanted for a long time but financially couldn’t afford , so I’ve been slowly converting my wifes 1.5 acres of mostly lawn over the last 5 yrs. into basically a food forest. so right now i don’t have a lot of one thing, so picking isn’t a issue . but when i get my land it will take a bigger commitment, no doubt. i was considering PYO but the cost of insurance and plant damage from careless pickers makes me lean towards harvesting myself or with the wife if need be. I’m not farming to make a large profit. just as a supplement to my other income. i want to keep it fairly small and manageable and as low stress as possible.
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Moose,
You are starting out very similar to the way I started with fruit farming. I started with a planting in my backyard (about an acre lot). It was profitable, but took a lot of time.
When we bought about 20 acres and scaled up, it was pretty different. The capital requirements are much more substantial. The pest pressure more intense. I’m still very low budget, which helps, but everything is very expensive. And time becomes everything when you scale up (even a little bit).
We don’t have time to hand weed anymore. Spraying, pruning, weed control all has to go faster (much faster) to be able to get it done. This takes capital input, otherwise you are paying expensive labor to get it done.
Blueberry is spot on when he says you will underestimate the cost of growing fruit. He’s also right about the time it takes to pick. We rarely pick blackberries because of the huge amount of time it takes to pick. We’d like to move to U-pick peaches as well.
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I have no experience running a farm, but have started a few successful businesses, including the current one I’ve run with a partner for 18 years. A few quick thoughts from what I’ve found useful, I would consider:
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Get a separate credit card to use for your business, or if you already have more than one card, just use one of them solely for business expenses. Since most things can be put on a card, this is a quick way to keep track of those business expenses and helps keep things separate from your personal finances. The card can be a personal card since getting a card specifically for a new business is tough, but you pay it the balance (every month!) from the business. Mine is set to autopay from the business checking account every month, so there is never any fees or interest, but definitely don’t run up credit card debt!
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Possibly setting up the company as an LLC with your wife and you as a partnership. This gives you some separation from your personal assets if someone sues you, making it harder for them to come after your home, etc. I don’t know what is possible with land in your own name, but maybe you could lease it from yourself for the business of if you are buying new land, it could possibly be put into the LLC from the beginning. In many states, this is quite easy to do, but does require some additional work in terms of tax forms, but maybe not too much more than being a sole proprietor. You may decide this isn’t worth it, but if you get busy and hire someone for a day to help and they cut off a finger or someone claims your berries made them sick…
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Look for ways to have multiple items to sell at the market. For instance, if you make Moose’s World Famous Blueberry Jam, you have one more thing someone might buy when they stop by your booth. You get the same number of people passing by, but if a few more buy an item or a few add another item to their cart, it can make all the difference in whether the time and effort of going to the market was worthwhile. Years ago I was an apprentice to a potter and we would make these silly little spoon rests which I thought were ridiculous, but when we got to the craft fair I realized having more than just platters and teapots meant we probably made 25% more at the sale.
Again, I haven’t run a farm, so definitely differ to others with farm experience and your accountant, but I thought I’d mention these thoughts.
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Olpea, I think you’re giving me credit for something someone else said…but I thank you for kind words.
Sorry Blueberry. I should have written the source out more - “Blueberrythrill”
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Most states including Maine have laws in place designed to protect farmers involved in “Agritourism” which would include PYO activities, so the liability risk of having customers picking fruit at your farm may not be as high as you expect. In order to benefit from the protection you must have the proper sign posted at the farm. However, waste or damage to plants from careless pickers is a very real problem. We have have not solved this problem and may never completely solve it. Most of the damage is done by “free range” children who are not closely monitored by their parents. Our Facebook page describes that “well behaved children are welcome” but the parents of the wild kids who cause the problems never seem to make the connection that non-well behaved kids are NOT welcome.
Regardless of how you sell your fruit and nuts you will need some type of product liability insurance for the products you grow. This coverage is often included in standard farm owner policies. My farm policy includes a million dollars of product liability insurance for fresh fruit or vegetables that we grow and sell but does not cover any foods that are processed. If you choose to sell any type of processed food like jam or jelly you may need another type of coverage.
The most efficient and least wasteful method would be to cherry pick the perfect fruit and sell it at the farmer’s market then have the PYO folks pick whats left.
https://www.mainelegislature.org/legis/bills/bills_125th/chapters/PUBLIC609.asp
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Hey Steve, that’s great you’re to the point of being able to sell some produce & fruit! At our local farmers market when it’s “berry time” everyone gets a boost as that sure brings customers in. Even someone with only a half dozen pints of berries is appreciated. And as someone mentioned, jelly/jam is surprisingly popular and helps during those early season “no produce/fruit yet time” , and fruit thankfully can be frozen and jam made in the winter (this from our vendors not my own experience – I buy from them!).
We’ve been a husband/wife small business for some 40 yrs with a variety of “businesses” as a Husband/Wife Sole Proprietorship. I keep it simple and straighforward for the IRS and my own sanity. We don’t have a separate bank account or credit card or such. It doesn’t make sense in our case. But I do keep an accurate and clean record of business expenses and income. It’s easy with a simple computer program or spreadsheet (I still have and use my favorite – DOS Quicken!) (I’m not a fan of upgrades). In the early years it was pen and a notebook. That worked. It doesn’t have to be complicated. I just file a Schedule C with our regular income tax, putting expenses in whatever category seems to make the most sense to me (or in your case it would be Schedule F for farming). Of course, farming may have more complicated rules. But starting out (or even 40 yrs later!) it’s nice if the paperwork doesn’t overwhelm the why you are in that business to start with.
Being in the Arts, and living where driving long distances is a given, our IRS bottom line on paper is seldom in the Profit area and we’ve never heard anything from them. We’re pretty small potatoes really. But I’ve never read any rule that says you have to declare every expense so it’s pretty easy to show a profit now and then. And hopefully you’ll even have a REAL profit! For us the only thing that really matters is if we’re enjoying what we’re doing and having fun. And I think you have that area covered.
Sounds like a wonderful plan and I’m looking forward to hearing how it evolves. Especially since it has been put forth to me that when all the trees, bushes, plants that have been finding their way into my orchard finally come into bearing that it will be an awfully lot of fruit for two people and a cat. Good luck with yours! Sue
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Check with your local extension office, they can point you in the right direction. In NY our Cooperative Extensions are run by Cornell University. You can find a lot of support through them including Fiscal record keeping books, journals, accounting record keeping layouts, et. al. They also have a lot of information on marketing your product, support for ag issues including soil needs, plant nutrition, pest and disease, irrigation, etc. Depending on what you decide to grow, you may have an extension expert assigned to come to your site to review needs and recommendations, or more than one depending on their expertise.
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i have been talking to the extension service. its run by the University of Maine system here. the lady i talked to sent me a packet of very useful info. i also plan to go to several seminars on berry production put on by them this spring.
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thank you for the info. im learning a lot from you folks. i will post on here how it comes along.
i will looking into the product liability insurance. id like to do jams with excess fruit as another product option to fresh fruit but then state inspectors get involved and this state is pretty strict. ill have to look into this in more detail.
moose71…you could always go with “packed by” some other party (who has a license)….and still sell under your name I suspect. I know you can in some states, anyhow. I am thinking it is Federal rule that allows that.
Do cats really eat fruit? Okay I learned something new. I thought cats are hypercarnivores.
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