About 30% to 40% of agricultural producers count on off-farm income to help cash-flow the business. This is also true for many of the 20 million small businesses in America. What are some perspectives on utilizing off-farm income when operating and managing a farm or ranch business?
Historically, a spouse or partner often provided cash flow and fringe benefits, such as health insurance, while supplementing the business through traditional employment, such as teaching or nursing.
Additional benefits of off-farm income often include retirement programs and Social Security benefits, which offer greater household financial stability.
Lift to credit access
Agricultural lenders often incorporate these off-farm income streams into credit evaluations, particularly when documenting and assessing family living expenses.
Working with young and beginning farmers and ranchers across the U.S. reveals that off-farm income or outside “gigs” are often used to leverage growth, such as buying livestock, equipment or land. One key is determining whether this income is recurring or a one-time, nonrecurring cash inflow.
Additionally, many ag business owners with outside income note that the networks and contacts they develop through these roles often energize and stimulate them as they engage beyond the traditional farm community and connect with the broader industry.
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Let’s consider some critical questions about whether to take on off-farm revenue opportunities:
Is a spouse or partner willing to provide the income and associated benefits? What is the duration of that commitment? When considering off-farm income to supplement the business, it’s important to account for child and adult care costs, commuter-related costs, and the full benefit costs.
How will extra work affect family? If the owner of the core business takes on outside income supplements or gigs, it could impact the balance of family and personal commitments.
Time management is a critical factor. This requires examining skill sets and commitments to avoid “burning the candle at both ends,” which often leads to burnout.
A common rule of thumb is to limit part-time involvement to 500 to 1,000 hours annually when operating a full-time business or holding full-time employment.
How much can off-farm income be counted on? If off-farm income is used to meet debt-service obligations, what is the expected duration, stability and income potential of those revenue sources?
When can ag business go it alone? Figure out the timeline for when the ag business can become sustainable without outside revenue streams.
Does off-farm work align with farm goals? On an annual basis, determine if the off-farm income sources and related commitments align with the goals of the business, the family and personal aspirations.
Role in agriculture
Off-farm revenue and income are important aspects of the agricultural economic landscape.
As rural America and job opportunities continue to evolve, this variable will remain a lifeblood for those aspiring to operate and manage farm and ranch businesses, both on a full-time and part-time basis.