by Elizabeth A. Tomlin
Agritourism has become a popular concept among farms looking for means to potentially boost their income, and Cornell Cooperative Extension (CCE) of Schoharie, Otsego, Sullivan, and Ulster counties have joined together to take part in a 6-session webinar hosted by Delaware County CCE, and sponsored by the Northeast Extension Risk Management Education Center to assist farm owners in preparing for farm visitors.
Delaware Co CCE Senior Resource Educator/ Farm Business Management Specialist Mariane Kiraly led the first discussion and spoke to viewers about some of the things to consider and how to prepare for when you‘re inviting the public to your farm for Agritourism events.
“Every farm is unique,” said Kiraly, explaining that risks will vary from one farm to another.
Production is a risk for some farms — and climate change must be considered.
“Production is a big risk,” remarked Kiraly. “If you have no pumpkins; you have no pumpkin patch.”
Other farms may find human resources to be a risk, as workers may not be available from year-to-year.
“You have to think of all of these things.”
Developing a risk management plan with your farm partners should be the first step in deciding whether or not an Agritourism enterprise is for you — and CCE staff members are available to view and critique your plan.
Kiraly reminds folks to be sure to include your insurance providers in your initial plans, as they will be helpful in making decisions. “They will help you reduce your liability.”
“Financial risk is a big risk,” Kiraly said. “And a lot of you are already mitigating your financial risk.”
And even if you are not borrowing money, there is a risk of losing money in this new venture. “You don‘t want to threaten your already successful business and your stability by adding something on.”
Four risks in the financial realm include; the cost and availability of capital, the ability to meet your cash flow needs in a timely manner, the ability to maintain and grow equity, and the ability to absorb short-term financial shocks.
Failure of a septic system, which is mandatory for most Agritourism businesses — and will be assessed by code inspectors, is an example of a short-term financial shock.
When considering financial risk, evaluate your line of financial credit, whether you use it or not, it should be available for emergencies.
An up-to-date financial record is mandatory for your plan, whether it is month-to-month or year-to-year, this record will show trends in your existing business.
“It‘s very critical to know what is making you money.”
Good financial records not only help you to evaluate what you are doing right, but, also show what is draining your finances.
Financial statements include balance sheets, income statements, and a cash flow statement. Assessing current resources accurately is part of this process.
Investing in new equipment for your new enterprise may not be a wise idea, as you cannot be sure of success. Kiraly advises using what you have already, until you know if the business is going to be profitable.
“If you‘re already behind the eight ball, taking on another venture, may not be something that you should do right now.”
A balance sheet will help determine the health of your current business.
Working out a partial budget will benefit your plan and show how a new venture will impact your current business. “We should also do a SWOT analysis — strengths, weaknesses, opportunities and threats — of your current business.”
Things that may put the brakes on your plan include credit ratings, increases in interest rates, insurance and regulations, and failure to attract the crowd you had expected.
Saturation in your area of the Agritourism venue you are investing in will impact your business. Research and seek advise before you invest — for your own security.
A business plan should be designed; clarifying and setting SMART (specific, measurable, attainable, realistic and timely) goals. It should include a mission statement, marketing strategies, define your product and your customer, supply information to support your plan, describe your team, evaluate resources, and calculate costs.
Assumptions in your business plan must be realistic. Accept critique and re-evaluate and refine your plan as needed.
Personal assessment is also important before investing in your new venture. Evaluating your business qualities, interpersonal qualities and experience, skills, and time assessment, will help you to evaluate your strengths and weaknesses.
Strategies for risk management include shopping around for interest rates, adding a partner to your venture, diversifying your venture into more attractions, having an emergency fund, carrying several kinds of insurance to transfer your risk, being involved with hands-on in the venture, choosing less risky ventures, and communicating with bankers on a regular basis.
Kiraly advises that if you run into trouble with your new Agritourism business, you should communicate with your lenders first. They don‘t want to receive their information through the grapevine. “They‘ve taken a chance on you, and you also have to understand their position of needing that loan repaid.”
“With risk, you want to reduce your risk, first of all, in any way that you can,” said Kiraly. “You want to transfer that risk to somebody else as much as you can. You want to avoid risk, and there are certain risks you have to accept.”