Iowa | dieseldoc - 11/4/2012 17:56
my advice . Dont do it. get as far away from dairy cows as possible. And from farming for that matter. Unless you want to work for free for the next 30 years. Its very hard to start out in farming as you probably already know. Try starting out with absolutely no help from anyone and its almost impossible. I did it 7 years ago and by the time I am sitting pretty good financialy will probably be on my death bed.If I dont go broke first. If you decide to do it good luck. You will need it. Notice that i said its almost impossible not entirely impossible.
I did it 33 years ago--not dairy, but with lots of livestock (for the time, anyway--this was before corporate ownership of livestock). I would do it again, (maybe, I think??). I wouldn't do dairy without a brother/partner so I could have a bit of time off, though.
Some insight:
1) Get a good college education, preferably in economics/business rather than agriculture, or at least Ag Economics or Ag Business. Tech stuff can be learned or hired, you'll make or break yourself by your business decisions.
2) If a new pickup, new tractor, new house, belonging to the country club, long vacations, etc, are important to you, don't begin farming at all. It's all wasted $$ that you need for reinvestment into the business
3) You had better have a spouse who shares your goals or you're doomed
4) Don't worry about taxable income, if you can pay your bills and build net worth. NET WORTH is where its at, not taxable income.
5) Be a businessman first. Almost from the start, hire help so you can spend some desk time "running the numbers" and make sound financial business decisions. Working hard and falling into bed tired is of course necessary, but not at all enough.
6) DO NOT use suppliers as advisors--they will sell you a more expensive ration than you need, more fertilizer than you need, etc. They are not your friend--they are in business to sell. Use land-grant extension specialists--they are very knowledgeable and want to see you succeed.
7) Knowledge is power! Before making a decision, gather as much info as you possibly can, and then gather some more. A good rule of thumb is to spend time on a decision based on, "how bad will this be if I am wrong?" Human nature can be far different--if the wrong decision doesn't hurt much, just MAKE it and get on to the important stuff.
8) After, and only after, you have gathered all the data and run all the scenarios, go with the numbers. Don't let emotion sway you--play the odds, stack them in your favor.
9) You will probably have to operate on a tight budget for decades, but if you're experiencing good net worth growth, that's proof you're on the right track. As to net worth: Value all real estate at what you PAID (plus give yourself credit for improvements--if you build a bin, add maybe 80% of that cost to your net worth, etc).I couldn't acre less what I'm worth due to luck or inflation, I want to know if I'm making real financial progress based on my efforts, not inflated land prices. I saw TONS of guys who weren't really doing well in the '70's who THOUGHT they were because they were valuing land they gave $800 for at $2500--they though they were doing good, made bad decisions based on this, and then were right back in trouble when the land was worth $1200 a few years later.
10) NO CONSUMER DEBT, NEVER!! No car payment, no credit card debt. You can get by without if you really want to.
11) Set up an IRA right from the start. Put what might amt to a car payment in it each month at minimum, even if you are short, never miss doing this. You'll eventually be glad you did, and these assets can't be touched if your business fails as long as you have a long history of doing it.
12) Live off margins, don't be "open" on something unless you have the financial power to withstand a crash. Lock in the inputs, lock in the production, and live off the margin. There will be times this isn't possible, but if you take a profit when offered you'll be in business next year.
I wouldn't dairy unless I either had a partner or was hell-bent on rapidly being big enough for employees--it's way too hard of lifestyle if you can't have time off.
Falling into bed--by itself-- won't win much anymore. You need time at your desk. |
Dairy Dilemma advice-young guy starting out
