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Urban farming can potentially be a profitable enterprise, as it benefits from easy access to markets, low start-up and overhead costs (if you don’t buy the land), better growing conditions (due to the urban heat island effect), easy access to water and less competition from native plants. However, if you decide that you want to run your farm as a business, you suddenly have an entirely new host of considerations to keep in mind. Like many urban farmers, we started Agave Farms at too large a scale, grew too many varieties of produce, and tried to do too many things at once, incorporating a retail and wholesale nursery as well as a community event space. We never researched the market before we started growing and didn’t have much knowledge of farming for a profit. We did have a business plan, but it did not include the due diligence it needed to be executed well. We had some idealistic passion, but not a pragmatic business plan for a for-profit business. We thought it could be just one of many types of services we could deliver at our venue. What we found is that small farms cannot compete price-wise with large commercial conventional farms, which do things at a larger scale with expensive equipment and chemicals. However, small farms can grow a higher-quality organic product that is more nutritious and delicious and can command higher prices for the discerning buyer.
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Farmers often struggle to make a living off of farming alone; recent USDA data show that most rely on off-farm income, mainly due to the high cost of land and equipment and the lack of an efficient distribution system for small farmers. Others run into difficulties because they follow their hearts and approach farming as a lifestyle rather than a business — planting crops without a specific market for them, taking on too much land at once, or not planting densely enough. However, farming on a small scale can be successful, as long as you approach farming as a business and not a passion project. That means marketing products well, being extremely efficient, prioritizing your bottom line, and taking meticulous records that you can later analyze to make changes. In retrospect, the cost of building the infrastructure for Agave Farms was too high, as were our labor costs; our farm manager did not have enough experience, and neither did the people we hired to build and maintain the farm. Moreover, I didn't focus much of my attention on the Community Garden because of its small scale, since I had a much larger and ultimately profitable landscape business to manage. We had a recipe for disaster.
With that said, we suggest that if you are considering making your farm profit-oriented, try running the operation as a hobby first to learn about the tasks and skills needed. That is because you don’t want to invest too much money before understanding the magnitude of the project you are taking on — which requires more than just a knowledge of farming, but also accounting and marketing to be successful. Urban Farming Education can help with this process and has firsthand knowledge that can help an organization avoid many potential points of failure, since we have been there ourselves. While knowing how to grow produce is the first step, starting a business requires a basic understanding of financing, administration, crop types, business models, finding customers, labor, and harvesting and packing. It is also important to know the potential revenues and profits of a small farm — mainly, that they won't help you get rich quick. Like with any business, there is basic math involved based on your size and production rates.
Financing: Farming, whether traditional, in a greenhouse, or on a rooftop, can require a significant amount of capital to get started, and the outdated agriculture financing system in the United States only makes matters worse. The U.S. Department of Agriculture offers loans to farmers, but they are optimized for land and row crop farmers, rather than urban agriculture. While some farmers can turn to equity investments, these are difficult to get and often targeted toward large firms; if you need to raise anywhere from several hundred thousand to several million dollars, or even less, your options are limited. However, this may be changing, as more and more investors are now taking on projects that they believe in, meaning that if you can position yourself as a mission-driven opportunity, you can stand out. So here is the reality — you better have very cheap or free land and a very good source of cheap water. You will need to finance this out of your own pocket or with a grant or with money from friends and family (I do not recommend this because they won’t get a very good profit off of your endeavors, if you pay them back at all).
Land and crops: One of the first steps you should take when developing a plan for your urban farm is to evaluate the market — is there a demand for the products you are planning to grow? Who will purchase them, where, and at what price? Alternatively, which products make sense to grow based on what people already want? Keep your initial choice of crops limited as well; it’s best to start simple, especially if you aren’t sure what kind of market exists for the crops you want to sell.
Ideally, you should focus on growing only 15 of the most lucrative crops, based on the current market price and how long they’ll take to mature. We learned this the hard way; in our first few years at Agave Farms, we grew many varieties but not a large enough quantity of each. Also, each variety had different harvest and plant times, making it more difficult to keep up with all of them at once.
When farming on land you don’t own, remember not to take on too much; start with ¼ acre or less. Consider three aspects before selecting your site: whether you want to be in a city or suburban area, where your base of operations will be, and where your farm plots will be. Cities are denser than suburbs, meaning it is more likely that your overall lot size will be smaller. Your base of operations is where you will take care of packaging, storing, and cleaning crops and ideally this would be in a central location. Finally, farming on a single site might be a good option if the alternative is farming multiple sites that are far apart; on the other hand, an advantage of spreading out is having potentially different microclimates and soil qualities so you don’t have all your eggs in one basket.
Administration: Once you have a basic idea of what kind of farm you want, think about the more technical aspects — do you have the right zoning for your farm? Can you get water there? Do you need any special licenses to operate? You will also need to purchase insurance and open a bank account, as with any business. On the marketing side, you will need to consider how to brand your farm, make a website, and develop a marketing plan. Urban farming is still so unique that it is seen as a social movement. People will want to hear your story, so be prepared to tell it over and over again and have an answer for “why you do what you do” that will engage your listeners. At Agave Farms, it cost me 6 months and about $36,000 to get temporary zoning for “Community Garden” status; while not the ideal zoning for what we ultimately wanted to do, it did take us in the direction of developing a social conscience and working with nonprofits and eventually starting our own.
Finding customers: The three main market streams for most urban farmers are farmers markets, restaurants, and community supported agriculture or CSAs, which are essentially food subscription boxes that farmers send directly to customers. Unfortunately, marketing to retailers will usually mean lowering your prices, which does not work for urban farming on a small scale. We did not do this very well because we planted too large a variety and did not ask the customers what they actually wanted before we planted, nor could we even follow through with crop schedules to be a predictable food source for restaurants.
Labor: A good rule of thumb is that your labor costs need to be 25% or less of your farm’s gross sales. You can consider hiring people when you need to meet a demand that is not being filled in order to grow the business. Once you have new employees, the best way to quantify their productivity is to have them perform tasks related to harvesting and processing first. Once they learn how to do these tasks efficiently, see how much they can do in an hour, and that will give you a good framework to calculate their wages. Everyone wants to work on a pretty urban garden until they actually do and find out it is difficult labor.
So, do you still want a for profit farm/garden? If you are up to the challenge, pay attention, do a lot of homework, and get lots of advice. There are several for-profit small farms throughout Phoenix that are well-run. You should not consider them competitors because all small farmers need to band together to be successful. The Sun Produce Co-op is an example of how small farmers can band together. Consider joining this or another co-op to help sell and market your products.
Sources:
Stone, Curtis. The Urban Farmer: Growing Food for Profit on Leased and Borrowed Land. New Society Publishers, 2016.
“5 Things You Need to Know About Financing Your Farm.” Urban Ag News, April 10, 2020. https://urbanagnews.com/blog/exclusives/5-things-you-need-to-know-about-financing-your-farm/
