To use this guide as your roadmap:

1. Read through the overview of each step.
2. Download the checklists for each section.
3. Check in with your mentors every few weeks.

Step 1: Decide to put in the work

Your journey to owning a local farm starts when you raise your hand and declare, “I’m serious about starting a farm and I’m willing to put in the work!” 

It’s important to note that no matter how much technology you plan to use, farming still requires a lot of time and perserverance to be successful. There is no “easy” farming business!

Curious if farming is for you? 

Today’s farmers are…

• Self-motivated.

• Driven to reach a goal.

• Always humble enough to know there’s always more to learn.

• Not willing to give up when things don’t go their way the first time.

Step 2: Get Connected

Community & Mentorship: No farmer starts and runs a farm entirely on their own. Getting connected to those with experience, as well as other aspiring farmers like yourself, will help you stay on track and avoid mistakes.

Data shows that you’re more likely to succeed with a mentor. 

Sometimes new farmers need encouragement to keep going; the perspective of a mentor can provide that encouragement.

The practical tips and pointers of experienced mentors fill in the “information holes” present in this industry. 

The first type of mentor may be the people whose blogs you follow or whose books you read.

The second are people who will eventually be your compadres; fellow farmers with similar goals and experiences. Check out UpstartFarmers.com for a starting point.

The third type of mentor is the direct mentor. Direct mentors are people who are experts in the field and available for regular advising. This could be an experienced farmer, an account manager, etc.

Step 3: Set goals, draft a business plan, and start your feasibility study.

Initial Planning: It’s time to set some goals and draft your business plan! Why are you starting a farm? What do you want to achieve? Who do you want to serve? All of these questions (and more!) need to be thought about before you start building or looking for funding. Part of doing this well is having realistic expectations about what running a modern farm is like (see below!)

The business plan will include things like a market analysis, the types of products and services you plan to sell, how to plan to promote your farm and get customers, and of course your competitive advantages.

Don’t wait! Start a “living” business plan document that you can add to as you figure things out. 

Need a little help? Learn how to write a business plan with the guide or through the Upstart U course.

What is a feasibility study?

The feasibility study is the group of research and estimations that answer the question, “Can I make money with my farm?” It covers…

• Revenue projections

• Fixed and variable costs

• A market survey

• A conservative pricing strategy

• A capital expense budget

• A look at your energy costs

• Detailed pro forma projections covering cash flow, net income and balance statements

Don’t fear the feasibility study!  This is your chance to evaluate whether your farm idea can actually make money. It will either give you positive results and the confidence to go forward, or it will give you negative results and help you avoid wasting time and money.

Step 4: Learn and Grow

Learn by doing: Your ability to make money as a farmer depends on your ability to grow high quality produce (and sell it, of course). Even though we’ve focused a lot so far on the business side of things, it’s critical aspiring farmers start a pilot system as early as possible to learn the in’s and out’s of soil-less growing. This is where you’ll learn all about growing healthy plants and work through some beginner system mistakes before you have any customers. 

We highly recommend Upstart University to anyone starting a modern farm. You can get signed up here and choose your first courses.

As you learn more about different growing techniques and crop management, you’ll start to form preferences for your farm. After taking courses like these, you’ll be able to make good decisions about how to grow and what to grow:

Step 5: Find Your Customers

(Can be done concurrently with step 6.)

Market Research & Sales Planning: If you’ve made it this far, you know that growing the crops is only half the battle when starting a modern farm. You can have the freshest, most flavorful crops in your city or town, but if you don’t have customers to buy them, you might as well close up shop. Market research is where you define profitability.

The bottom line: If you’re not selling the crops you grow, you’re gardening. And gardening is great! Just don’t expect to see any return on your investment. 

By this point, you have researched the Four Markets. You know some general information about your markets from doing your feasibility study, and you have identified potential markets. This section just helps you to fill in the holes.

General research consists of easy-to-find information, usually from places like the US Census. The purpose of general research is to estimate your market cap.

Local research, on the other hand, requires a more specific approach. (Learn the basic difference between the two here.)

Local market research isn’t hard, but you do have to show up and give a little hustle. The most important part of local market research is getting face-time with potential clients. This is the only way to get truly accurate local sales and pricing data. Plus, it gives you a bunch of leads to start with later down the road when you’re actually delivering produce. (REAL opportunities are more valuable than estimated opportunities!)

Once you’ve chosen your entry point and sales model, you’ll look forward a little bit. Although financial planning is the next section, you might be working on financial planning and marketing concurrently. Since marketing is coming up, it’s time to start thinking about your value propositions!

Review your sales model, target markets, and everything you’ve learned about your growing technique and crops so far. As you do that, you’ll notice certain strengths and values that give you an advantage over the other producers active in your market.

These strengths are your value propositions- the reason that people buy your produce over others. You’re going to want to play them up in your marketing.

Step 6: Estimate Funding and Debt

(Can be done concurrently with step 5.)

Financial Planning Part 1: The first financial planning phase includes funding and debt research.

When you’re ready to start looking at funding, you have several options:

• Loans
• Private investment/venture capital
• Equipment leasing
• Crowdfunding
• Grants

Learn the basics of each option (pros and cons, special considerations, payback strategies & timelines, and how to get started in The 20 Minute Guide to Financing Your Farm.

Either way, farm owners must be comfortable with the level of debt that they are pursuing before starting their farm! To make the best debt decisions for your farm, you need to understand the types and factors of debt.

There are eight types of debt that new farmers might incur:

Step 7: Plan Your Facility

Choose the right facility. Modern farmers are using all types of facilities, from greenhouses and warehouses to basements and backyards. Different types of equipment and production methods work differently in different facilities. Your production methods will dictate to a significant extent which type of facility you use.

Here are the common trends we see:

DWC (Deep water culture) systems are typically run in greenhouses in tropical areas. The high labor requirements and large footprint of the technique are best suited to places where labor is cheap and space isn’t too cramped.

NFT (Nutrient film technique) systems are run either in greenhouses or in stacked systems in greenhouses or warehouses. The first facility is best suited to this technique.

ZipGrow Towers are used in greenhouses, backyards, and homes. Since they are so modular (each Tower is separate), they can fit into almost any space in any quantity.

ZipFarms are ZipGrow-based systems specially designed for warehouse use. They consist of ZipGrow Towers on a rolling rack with a light rack overhead; they are pre-configured but set-up can still vary by quantity and orientation.

Media beds are best for outdoor or greenhouse facilities. Media beds tend to be heavy with high thermal mass and a large footprint. Media bed growers don’t move their equipment, and stacking is out of the question. That makes them a good fit for places that aren’t tight on space.

Bato buckets are primarily used in greenhouses, with some indoor facilities. Most hydroponic tomato systems are bato systems (or “bag systems” which function similarly). Most of these systems are in greenhouses.

If you aren’t sure which grow method is right for you, take the Upstart University Course “Choosing Your Production Method”.

Modifications to the facility will have to be made on a case-by-case basis but could include:

• Insulating
• Sealing
• Electrical additions
• Chiller installations

Of course, some facility characteristics need to be in place before purchasing. These are usually infrastructure traits that can’t be changed. For example, four necessary attributes are:

1. Adequate ceiling height
2. Minimum dimensions
3. Exit access
4. Wall protrusions

(Learn more about those four attributes here.)

The best way to determine the modifications that you will need is to know your equipment well. Equipment manufacturers can get you information on dimensions, set-up, and configuration.

Step 8: Implement Sales & Marketing Plan

Are you set on financials? Comfortable with the level of debt you’re taking on and confident of the projections you’ve made? If yes, then it’s time to start marketing and planning sales.

Your brand is the real estate upon which you build your reputation. This is where people judge your farm, your farm’s values, and of course, your farm’s produce.

The difference between poor branding and good branding can often be the difference between good market cap and low market cap, high-quality leads and poor-quality leads, etc.

Before you create a branding strategy:

• Know your packaging needs
• Take the Upstart U Law 3- Intro to Food Labeling and Weighing

Market action plan – the nitty gritty of selling

The second part of planning marketing is creating the action plans to get your sales models off the ground and working for you!

The action plan you craft will depend on the market you’re using as an entry point. Check out the resources below to learn about starting a CSA (community supported agriculture group), selling to restaurants and grocery stores, and other sales models.

Restaurants:

Benefits of Growing For Restaurants

Disadvantages of Growing for Restaurants

Farmer Tip: How to Make a Great First Impression on Restaurants

Commercial Hydroponics: Finding Local Restaurant Demand

Farmer’s Markets:

The Challenges of Farmer’s Markets for Hydroponic Growers

The Benefits of Farmer’s Markets for Hydroponic Growers

1. Set up bank accounts for your farm business

Set up a separate bank account for your business. This is one indicator to the IRS that your farm is an actual business, which will make taxes and audits much smoother down the road.

2. Set up payment tools like Square and Quickbooks

Some farmers use plain old cash and checks to receive payment from customers, but in some situations it’s good to have other options. For example, many market goers only carry a card for payment. By limiting payment to cash or check, you may be missing out on significant business!

In addition to accessible payment, many payment tools like Quickbooks are combined with other account management tools that can make accounting much easier.

Your accountant may have recommendations and preferences for payment systems! Be sure to consider their preferences, since they will often be the main person using the system.

Step 9: Organize Business Operations

Operations, management, and administration are the machinery of your business. Understanding your machinery will involve a lot of research and paperwork, so get ready! It can be helpful to bring in other people to business operations if you’re uncomfortable doing it yourself. During this phase of business planning, you will research and plan:

A business organized as a sole proprietorship is owned by a single individual or family and is not organized as a corporation. This is common, especially in agriculture, and it gives the owner of the business a ton of control/responsibility. For example:

• All profits, losses, and liabilities are vested in the proprietor (which can be either a good or a bad thing).
• Lenders base decisions about the business based on the assets and credit history of the proprietor.
• Business affairs can be kept confidential.
• Proprietors have complete discretion when it comes to selling the business.

Running your business as a sole proprietorship has its disadvantages, too, because:

• Proprietors must pay personal business taxes.
• Proprietorships may suffer from limited capital funds available to the business.
• Highly trained employees are limited in their opportunities to rise to the top.
• The business is dependent on one person; they lack stability and continuity.

A partnership is owned by two or more people. We recommend having a written partnership agreement so that each partner knows what their responsibilities are. Oral partnership agreements are legally valid, but they are more difficult to defend in the face of a dispute.

Advantages of a partnership include:

• They are as easy to set up as a proprietorship, and they have low setup costs.
• Taxes are paid by individuals on their share of the profits.
• Partners may sell their interest in the company as long as the other partners agree.
• There are many different partnership levels and types, including senior partners, junior partners, silent partners, and many more.

A few disadvantages of a partnership include:

• General partners face unlimited liability.
• A limited number of partners may be added or feasible.
• Partnerships may lack continuity and stability for same reasons as sole proprietorship.
• There are some tax disadvantages.

A corporation provides owners with protection from losing more than what they invested if the business fails. It is a special legal entity endowed by law with the powers, rights and liabilities of a person.

There are some obvious advantages of being incorporated:

• Owners are not personally liable for debts.
• Transferring ownership is easy.
• It is perpetual, meaning that it doesn’t have some the continuity issues of sole proprietorship and partnerships.
• It’s easier to raise capital.

A few disadvantages associated with corporations are:

• Corporations face double tax liability (though there are some exceptions to this).
• They face more regulations.
• There is a lack of privacy.
• Owners may not control management or policies.

“It’s a wise business decision,” Dr. Nate emphasizes. “It’s just good business practice to have insurance on what you’re doing. It’s being responsible to your business, your employees, and your consumers. Farmers need to be prepared to fix problems.”

Upstart Farms should carry a general liability or umbrella policy on their farm.

You want to have insurance that protects:

• The product liability of your produce and food items
• Your farm assets

1. Use an insurance broker.
When searching for insurance for your farm, it helps to use an insurance broker. A broker will go out and get quotes from dozens of insurers, coming back to you with the best policy.

Your insurance broker should obtain at least 3 to 6 quotes for you, but you’ll want to get as many as possible. Make your broker work for you!

2. Get plenty of coverage!

The amount of coverage that you obtain depends entirely on your farm. At the bare minimum (and seriously – this is the absolute minimum), a farm will want at least $50,000 of insurance coverage.

Consider what kind of business your farm is doing. If you expect to do $200,000 in sales this year, have your insurance cover $200,000 to $400,000. Your broker and agent may be able to offer a specific recommendation for your farm – use their advice!

1. Register your business
The easiest way to do this is to go to the state government website and follow their instructions for registering your business! There may be a small fee (in Wyoming it’s $100, for example), and it will take a few weeks for the registration to go through.

2. Get your employee identification number (EIN).
This is necessary to file taxes, but free and easy to get.

3. Get workman’s compensation and unemployment insurance set up.

4. Register to file taxes.
If you have questions, talk to your state office. You can start at eftps.gov.

5. Research labor laws.
These will be state specific. Start with your state’s Department of Labor website.

When you get new employees:

1. Fill out a W4
This allows you to deduct taxes from paychecks.

2. Fill out an I9
This makes sure that they have the correct identification paperwork.

3. Safety training
If you have questions, talk to your state office. You can start at eftps.gov.

You can pay employees whenever works well for you and your bank, as long as it adheres to your State’s / the Federal Minimum Wage,

Payroll systems are highly recommended. Some examples are Quickbooks, Paychex, ADP, and (only accessible in some states) Zenefits.

You’ll pay taxes when you do payroll. In addition, you’ll have to submit a 9-41 form quarterly, and 9-40 and W-2 forms at the end of the year to the IRS.

Certain states also apply a state income tax.

A certified accountant can help you keep your finances and legal obligations orderly. They will be able to coordinate tax forms and make sure that you don’t miss deadlines, payroll, and other tasks!

Before hiring an accountant, do your research! Read reviews on accountants in your area and be sure to talk to them before hiring. Make sure that:

• They are familiar with your business and sales models
• Their rates are within your budget
• They are experienced with the specific services you need

Certification & compliance

Many markets require official certifications for you to access. Even if your market doesn’t require it, it is important to understand HAACP, sanitation procedures, GAP compliance, and Food Defense.

These certifications indicate that your farm is up-to-standard in areas of safety and sanitation across your farm:

• worker health and hygiene
• water and sewer quality
• air quality
• pest control and wild/domestic animals
• nutrient systems
• state and federal traceability
• harvesting sanitation
• processing
• storage and transportation

ZONING

A huge part of choosing a site is zoning. Before you can begin growing crops on a site, you have to make sure that it complies with all city and/or county regulations. These regulations are put in place to avoid public or private nuisances to surrounding communities.

Read more: This article on siting a farm in Illinois has some great insight to get you familiar with what the process can look like.

Zoning, a land-use planning system used by cities and counties, plays an important role in siting a farm. Urban farmers want to grow in a zone with favorable regulations and which doesn’t eliminate any of their farm processes.

There are five basic zones:

1. Industrial
2. Commercial
3. Agricultural
4. Residential
5. In-field development zone (can be used for all kinds of purposes)

The differences between these zones define where you’re allowed to grow your produce, where you’re allowed to sell your produce, composting, structure types, size limits, business and building permits, and even things like fences and parking.

The best first step is looking up the  zoning regulations for urban farms or for a specific zone in your area. Most cities list their zoning maps and laws online.

Learn more about how an urban farmer can navigate zoning regulations.

PARTNER CONTRACTS

Common mistakes and issues

Almost everyone can agree that the business partner relationship is an important one. Your business partner will be a critical part of the business equation, and can either be a very strong point or a very weak point in the business structure.

Bad business partner choices have resulted in – at best- a road block and cause of delays in business development. At worst, a bad partner relationship can ruin a business. Often, this is a loss of both a business and a friendship!

Despite the relationship being important, many new business owners don’t plan the partnership very carefully, preferring to lean on trust and “gut instinct” than sterile contracts. This plays into the myth that a legal setup spoils a friendship.

It’s smart to communicate responsibilities and expectations up front. Elesif McDonald has worked with hundreds of new farmers and seen both the benefits and the challenges of partnership relationships.

Elesif and other experts agree on these tips for choosing a business partner:

Step 10: Get equipment

After checking your layout with advisor, source your equipment. Here are our recommendations for hydroponics, aquaponic, and indoor farming equipment:

Plumbing: Most plumbing parts like PVC, fittings, and glues can be sourced from a local Home Depot or Lowe’s. Some of the more obscure fittings are available online.

Lighting: Lighting is a complicated equipment type to choose. The most popular types of lighting are HID, LED, and fluorescent lights. (Learn the pros and cons of each here.) Purchase lighting from well-known sources like GE or Phillips.

HVAC: Commercial farms should consider a professionally-fitted HVAC system. HVAC is a crucial element of growing. Consultants like Doctor Greenhouse are well worth their fee in this regard. Click here to take the Upstart University HVAC Course.

Structure & infrastructure: Different growing techniques and climates require different facilities. Greenhouses, indoor spaces, warehouses, and containers are the most popular facilities for modern farmers.    

 >> Learn more about greenhouse equipment here or compare greenhouse and indoor farms here.  

   >> Learn more about the considerations of container farming here. (Our only recommended container farm manufacturer is Modular Farms.)      

> Learn about the considerations for a warehouse facility here.

Growing equipment:  DWC (Deep Water Culture) – We recommend Bigelow Brook Farms for DWC-specific products. You can also hand build DWC systems, but this can be difficult on a commercial scale.

NFT (Nutrient Film Technique) – Crop King offers quality NFT supplies. NFT systems can also be built by hand, but this again becomes difficult at a commercial scale.

Media Bed – Media bed systems are easy to build from hand using lumber and parts. A convenient media bed kit that we recommend is the My Aqua Farm.

Bato buckets (or Dutch buckets) – Bato buckets can be built on a DIY level. Commercial growers are better off using a manufactured product like these buckets.

ZipGrow – ZipGrow Towers can be used in greenhouses, in warehouses (the ZipFarm), and containers.

Media – Hort Americas offers a wide variety of media for hydroponic and aquaponic growers. For help deciding which media is the best fit for your farm, go through the Choosing Your Substrate course on Upstart University.

Pesticides – Pesticide legality and effect differ by facility type, growing method, and location. For specific pesticide recommendations and information about licenses, talk to your local Extension Office.

Step 11: Start Growing & Delivering Crops

Your farm and business are both ready to go, and you can finally start operating! This means:

• Growing crops
• Delivering crops
• Managing customers
• Housekeeping & maintenance