With fluctuating milk prices, many dairy producers desire a more reliable, less cyclical income stream.  At the same time, the local food movement has increased demand for locally produced foods. 

Throughout the country, dairy producers are considering on-farm processing to add value to the milk produced on their farms.  Dairy producers may bottle milk or process their milk into cheese, ice cream, butter, yogurt, or cream. 

Generally, adding value to a product consists of transforming a product from its original form to an alternative form that will allow it to bring more value and income to the business.  Through this process, consumers receive a high-value product and dairy producers may receive a new revenue stream for their business. 

These products often have a distinguishing marketing feature (i.e. organic, grass-fed, or natural) in addition to being locally produced.  As an individual farm enters an on-farm processing venture, non-monetary benefits come from new connections with consumers and local families.  On-farm processing increases interactions between farmers and consumers and consumer education. 

The decision to enter this venture should not be taken lightly.  Like many small businesses, the failure rate for dairy on-farm processing enterprises is high.  Additional food safety and liability risks must be considered. 

While many producers are attracted to the potential for increased value for their milk, to realize this value, consumers have to actually purchase the product.  Moreover, successful operation of a dairy on-farm processing venture requires a completely different skill set than the skills needed to manage a herd of dairy cows. 

How do I know whether I should start a business?

A business plan is one of the most difficult but most important parts of starting an on-farm processing enterprise.  When dreaming up a new business, especially an on-farm dairy processing enterprise, excitement takes over, and it is easy to become overly optimistic and blind to potential pitfalls.  A business plan helps organize the overwhelming amount of information and ideas into one document.

Why is a business plan important?

  • Lays out plans into a written form
  • Helps to set a timeline of practicality and priorities
  • Documents goals and purposes
  • Forces inclusion of details often overlooked
  • Helps managers to consider parts of an operation that may not have been considered without a business plan

What should be included in a business plan?

  • Market and product research
  • Cash flow and profitability projections
  • Location plans
  • Financial plans
  • Extra insurance
  • Business structure
  • Product manufactured
  • Future short- and long-term plans and goals

Multiple websites and organizations are available to assist in the writing or outlining of a business plan.  The Small Business Administration website outlines everything from how to write it, how to find a niche, workshops offered, and much more. The Agricultural Marketing Resource Center provides sample plans, free online worksheets, and a host of business assessment, planning, and management links from across the nation.

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