Starting a farm business in a flat market

Small Business Guides

7 min read

Starting a farm business looks tough, you say? Try starting two. At the same time. In a bad market. Get lessons from someone who survived it.

Bad timing

Dairy commodity prices imploded by more than 50 percent during Simon Washer’s first year on his farm in Hawera, New Zealand. It was a brutal introduction for the 27 year-old, who’d spent five years paying his dues as a sharemilker and farm manager.

But that’s not all – Simon already had a farm feed startup in its infancy. We take a look at his experience starting two farm businesses at the same time.

Starting farm business number one

Simon was a sharemilker and farm manager when he started his first business, back in 2013. It kicked off after he ordered some cattle feed from a farm 10 miles away. The day it arrived, he discovered his next-door neighbor had just cut some feed for sale too.

After asking what they wanted for it, he found he could’ve saved $10,000 by buying from them. Unfortunately there was no way he could've known they had feed for sale because there wasn't a common marketplace. Farmers mostly found feed by searching newspaper ads or calling contractors.

Saw an opportunity

While some feed was sold online using Trade Me (a local alternative to ebay), buyers didn’t really know what they were getting. None of the product was graded for dry matter, crude protein, or metabolisable energy. So Simon saw his opportunity.

By late 2013, he’d set up his own website: farmfeed.co.nz. When someone lists feed on the site, they’re invited to submit a sample for grading. Farmfeed arranges sample pickup and testing, then posts the results with the listing. It allows sellers to charge a premium and gives buyers confidence.

It wasn’t long before feed contractors started using the site and deals were being done, but it wasn’t exactly a well-oiled machine. Simon hadn’t figured out how to make money from the venture, and the site – built by a student for $1500 – was clunky and difficult to use.

Ready to walk away

Simon started asking site users what they thought of his marketplace and the conclusions were ugly. Pictures didn’t load properly and the user experience was generally poor. He’d have to rebuild the site with a professional, but initial estimates put the cost at $18,000.

It was hard to imagine how Farmfeed would ever repay that sort of investment so Simon told his customers he planned to ditch the project. It didn’t go down well.

They asked Simon how he’d feel if someone else picked up the idea and made a success of it. That's when his competitive streak kicked in. He hired some web developers and doubled down on the project.

When business is more work than you thought

Those early days of Farmfeed had also taught Simon that the business wouldn’t be as hands-off as he’d hoped. His vision was for buyers and sellers to connect on the site then do a deal without any involvement from him. It wasn’t happening that way.

A lot of customers would ring and ask Simon to create the listing, or organize transport for the feed. As such, Farmfeed was becoming a big, time-intensive service to deliver. If it grew as he hoped, it was going to chew through a lot of his time and energy.

I’d hate to be watching someone else do this and thinking ‘bugger, I had that idea’.

Starting farm business number two

Soon after relaunching Farmfeed, Simon finished up a business plan to buy his own dairy farm. Milk solids were fetching around $8/kg at the time, so he budgeted for a relatively conservative $6/kgMS payout and took the plunge.

He’d spend 2014 getting the farm into peak working order, and hit the ground running with two strong businesses in 2015. That was the plan anyway. But starting a second business while the first was still just a baby would be a big ask.

Struggling to do it all

It was around this time that Simon met Marilyn Davies, a director at Busing Russell chartered accountants.

“I told her I’m in the shit because I’ve got two businesses and I can’t run them both,” Simon remembers. Marilyn agreed, and helped Simon figure out how to handle it.

Simon would focus on starting the dairy farm, while Rachelle Hopkinson was brought in to manage Farmfeed. His instruction to his new staff member was simple – make enough sales to pay your salary. He didn’t know anything about ecommerce or logistics, so there was no other advice to give.

Good news, bad news

Rachelle got it done. The new Farmfeed was self-sustaining by the end of her first year. Simon had also worked hard through 2014, priming the dairy farm for a big 2015. Everything was teed up for a successful 2015 – except milk payouts plummeted below $4/kgMS.

With one business just breaking even and another facing tough times, Simon went to see his bank manager. It wasn’t a meeting he relished, but it ended up changing the trajectory of both businesses.

Changing priorities

Simon’s bank manager suggested he switch focus back to Farmfeed while the dairy business rode out the downturn in milk solid prices. After discussing the advice with his accountant, she agreed to help out. Marilyn would step up her involvement on the dairy farm business, freeing Simon to jump back into Farmfeed.

With he and Rachelle both working hard on the business, Farmfeed revenues rose 400 percent in the next year. It was going so strong that it was providing extra cash into the dairy operation.

Never had a bad day

Having a second business did more than provide financial backup – it was a good distraction from the difficulties the dairy farm faced.

“Every time the dairy price went down, I’d jump on the calculator and see what the damage was to the farm business, but I didn’t have to dwell on it,” he says. “I’d just ask myself how we could make that money back through Farmfeed. Mentally, I never had a bad day when payments went down.”

Farmfeed’s success did have a downside, though. As it grew, so did the paperwork. And with things so tight on the farm, Simon didn’t want to spend money on a new hire. As a result, he and Rachelle spent hours hunched over spreadsheets, trying to stay on top of finances.

The mountains of admin put a brake on the business. Instead of trying things to grow Farmfeed, Simon and Rachelle were stuck working on the books.

We were guinea pigs

When Simon shared their frustration with Marilyn, she switched them onto online accounting software. The intention was to automate a lot of the data-entry and bookkeeping tasks that they were doing manually, but there was cause for caution.  

At the time, Busing Russell were just beginning to introduce the technology to some of their clients, so Simon’s farm businesses would be guinea pigs. He didn’t mind. The bookwork was such a distraction that they had to try something.

They took the leap and have never looked back. Although they went through some teething trouble getting legacy accounting data onto the new system, online accounting has saved them 12 hours a week. That means an awful lot to a small business with just a couple of employees.

You can’t be scared

Simon now runs Farmfeed with his partner, Monica. It’s still small and lean and incredibly busy but automation means none of that hard work is wasted on bookkeeping. Every ounce of effort is focused on improving the business. Rebounding milk prices mean prospects have lifted for the farm too.

It’s been almost six years since Simon first dreamed up Farmfeed. One financial crisis and two businesses later, he’s learned a lot. But he wouldn’t change anything. Starting a farm business was rewarding – starting two has been a revelation.

“You can’t be scared of it,” he says. “We’ve thrown a lot of money, time and energy at it but I’m glad. I’d hate to be watching someone else do this and thinking ‘bugger, I had that idea’."