How much does it cost your farm to bring in the next generation?

Oct 25, 2023 | Uncategorized

Looking to incorporate a new farm family into your operation?

One consideration is this: will the addition generate enough gross income so the operation doesn’t go backwards?

A study by Kansas State found the average farm family has $70,000+ in living expenses. Assuming your new farmer is living on a tight budget, how much gross revenue does the farm operation need to bring in to handle an additional $70,000 in “salary?”

Use the 5:1 ratio.

For every $5 of revenue, your farm will net $1.

So, if you’re adding an additional $70,000 in family living expense, here’s what your operation’s gross revenue needs to increase by:

$70,000 × 5 = $350,000

Now that you have the target number, think of ways to gain this additional revenue. Here’s some ideas:

  • Successor farmer replaces current hired labor
  • Efficiencies through technology and new ideas
  • Expansion of current enterprises
  • Addition of complimentary enterprises

While every situation is unique, it’s important that both the successor and legacy generation are in agreement on the expansion strategy, to ensure both generations are fully “bought-in”.

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