Edition #14

October 7, 2023

Good morning and welcome to the Braintrust Ag newsletter. It’s been said this email is more exciting and less awkward than a gentleman & his chicken… we’ll let you be the judge.

A few notes to begin:

• Next week (Oct 12) will be the next SOIL Gathering. This session’s topic: Transitioning Management Duties - Hope you can all attend!

• I’m actively scheduling some Expert Q&A sessions, where members will be able to listen live & ask questions to ag business & transition pros. More details coming out soon.

• We’ve got 97 members in the community, can we hit 100? Click here to join.

Alright, let’s get to the topics that will help you build a strong, sustainable agri-business.

-Clint

Here’s what we have this week:

• 🧑‍🌾 Dirt Work

• 🎥 Freelancing

• 📃 Option to Purchase

• ⚖️ 10 Contract Rules

• 💲 Finance Incentive Program

• and more…

“AG-ADJACENT” SIDE HUSTLES Part 5

Idea Breakdown

We’re going to continue looking at some ag-adjacent side hustles and do a breakdown on them.

Catch up on the first, the second, the third, and the fourth installments by clicking the links.

Let’s dive in.

Dirt Work

Description: There’s a common need for many farms & ranches with jobs varying in size from small, half day tasks to large, month long projects. Something that ranges from a must-have to would-be-nice is various types of dirt work.

It’s been said if you have the right dirt work equipment (mini-excavator, skidsteer, payloader, backhoe, excavator, blade, box scraper, etc), you’ll never have to look for work. Jobs will find you.

Some potential tasks:

• Landscaping

• Snow removal

• Tile outlet repair

• Shaping feed lots

• Hydrant installation

• Road/driveway grading

• Tree/shelterbelt removal

• Stock dam cleaning/digging

• Waterway establishment/repair

Start-Up Costs: Medium

Depending on the services offered investing in the specialty equipment needed to hire yourself out, can be costly. However, this equipment is readily available to be rented from local rental shops and equipment dealers, so you can break into this side business for relatively little cash.

The Good:

• Durability

• High demand

• One-person jobs

• Year-round need

• Complimentary seasons

• Word of mouth advertising

• Proximity to landowners, farmers, and ranchers

The Challenges:

• Specialty insurance costs

• Wetland/other compliance

• Gaining equipment experience

• Equipment costs/rental availability

• Breakdowns, maintenance, and labor

Here’s what I’d do:

Decide on a certain piece of equipment you’re going to focus on. Make a list of all the possible tasks a farm/ranch might need done with that equipment. Learn how to operate it proficiently (do a couple low-risk jobs to start so you get the hang of running it).

Hang flyers, talk to neighboring farmers, post in local Facebook groups, and take out a cheap ad in the local paper. Offer specific services (“installing culverts” vs “dirt work”) because often folks don’t know they even want/need something done until the idea is put directly in front of them.

Rent the equipment (have it delivered to the jobsite if that’s an option), do the task, and send out weekly invoices. I’d bill the customer directly for the rental equipment and charge them a flat fee for your services.

As demand for your ag-adjacent side hustle grows, consider buying that piece of equipment, and charge the same “rental rate” plus your flat fee to customers. Here’s a thread on an example UPS driver who eventually quit his job thanks to a mini-excavator:

Keys to Success:

• Outstanding work

• Rent, don’t buy right away

• Know your costs & charge enough

• Low debt & high equipment maintenance

Conclusion

This ag-adjacent side hustle checks the box on our two-part test, which is:

1. Does it compliment your current or future farm enterprise?

2. Does it put you in proximity of other farmers & landowners to build relationships?

The demand for these services will most likely always be there, and if you end up acquiring a bunch of equipment to perform the services, you can always hire folks to operate or rent out your equipment to local farmers/ranchers. It’s a great way to set yourself apart from other “custom work” operators and carve out a niche to build relationships with landowners.

Mini Breakdown

Freelance Journalism/Photography/Video

Want to start something with essentially no start-up costs? You’ve most likely got a computer, tablet, or phone that you can use to write, take pictures, or record videos on.

Use that to provide ag specific content for farmers, ranchers, and local ag businesses to help tell their stories and promote their products.

Here’s some thoughts:

1. Identify what you’re most passionate about and you have the skillset for (writing, photography, video)

2. Decide on your niche

   • YouTube video production

   • Purebred livestock sellers

   • Breaking ag policy news

   • Lifestyle farm interviews

   • Farm family portraits

   • Ghostwriting

3. Set up a website & social media accounts to promote your services

4. Produce high-quality content and ask for referrals

5. Join a peer group with other ag business folks

6. Talk about it online & grow

This is something you can do in the mornings, evenings, weekends, or holidays that can have a far reaching impact with little to no start-up expenses.

Do you have an ag-adjacent side hustle idea you’d like to see a breakdown on? Email [email protected] and it might be featured in an upcoming newsletter.

RESOURCES UPDATE

A handful of resources available for download I’d like to highlight:

Farmland Purchase Checklist

Complete proper due diligence and protect your big investment with this comprehensive guide.

Located: Resources > Checklists > Farmland Purchase Checklist

Carbon Contracts Concepts

Thorough publication on carbon contracts and the key concepts to consider that make them unique from other types of ground and mineral leases.

Located: Resources > Miscellaneous > Carbon Contracts Concepts

FSA 2001 Application Worksheet

Filling out applications for the FSA is often a pain. Use this spreadsheet when filling out the FSA 2001 loan application so you don't have to manually enter & calculate all your data.

Located: Resources > Budgets > FSA 2001 Application Worksheet

OPTION TO PURCHASE

An option to purchase grants a buyer (potentially a tenant) the right to initiate a property sale based on predefined procedures within a set timeframe. While such options can exist independently of lease arrangements and are termed option contracts, they can also be integrated into lease agreements.

In farm leases with an option to purchase clause, the tenant (buyer-tenant) can compel the landowner (seller-landlord) to sell the property by exercising this option. This option is typically part of the standard lease, but sometimes the lease and option to purchase are distinct documents. For instance, after signing a lease, both parties might decide to have a separate option to purchase. Such agreements can be labeled "lease-to-own." However, they remain leases with an option to purchase clause.

These purchase options might range from a few sentences to several pages in length. Given the complexity of property transactions, overly simplistic options could overlook significant concerns.

Key elements a standard option to purchase clause should cover include:

1. Property Description: Clearly define the property, distinguishing if it's the same as the leased premises, and identify associated assets like buildings or equipment.

2. Consideration: This legal term denotes an exchange of value, vital for contract enforceability. If separate from the lease, the option to purchase must have its distinct consideration, often in the form of a fee. This fee validates the contract, ensuring it's not a revocable gift.

3. Option Duration: Specify the period during which the option can be exercised. It could be within fixed dates or anytime during the lease.

4. Option Terms: Detail how the option is activated and the process for the tenant to notify the landlord of their intent to buy.

5. Property Price: State the property's purchase price, which might be a fixed amount, based on an appraisal at the time of exercising the option, or determined through a formula.

6. Price Acceptance Timetable: Should the price be set through appraisal or a formula, stipulate the time frame for the tenant to accept or reject it. This period might also consider if the tenant can secure financing.

7. Rent Towards Purchase: Some options might allow a portion of the rent to count towards the purchase price. This should be clearly detailed, especially how it's accounted for and its legal implications.

8. Transfer Terms: It's often recommended to specify the property transfer terms within the option itself. This preempts potential complications and ensures both parties understand the process.

In essence, an option to purchase provides a structured and legally binding route for potential buyers, often tenants, to buy property under specific conditions. It is essential for both parties to clearly understand and agree upon the terms.

CONTRACTS

A young farm couple recently asked for some guidance on a potential new production contract. They’re looking to raise broilers in an attempt to add another revenue stream + expand their farm.

Here’s a list of 10 Basic Rules for Contracts to keep in mind:

1. Understand Contract Dynamics

→ Whoever writes the contract benefits most.

Contracts primarily protect the interests of the drafter. As contracts aim to maximize advantages, those with less bargaining power might get less benefits.

2. Thoroughly Review Contracts

→ Always read and comprehend contract terms.

Contracts, once signed, bind you to specific legal obligations. Courts generally uphold contract terms, even if deemed unfair.

3. Seek Clarification and Legal Counsel

→ If unclear about contract terms, ask and get legal advice.

Some states mandate production contracts be "readable" (understandable and disclose potential risks).

4. Payment After Fulfillment

→ You must complete your contract obligations before receiving payment.

5. Don't Assume Not Performing Will Be Excused

→ All contract terms hold legal weight, some more than others.

If unforeseen circumstances (even acts of God) hinder performance, it's not always excused. If you anticipate defaulting, negotiate with the other party.

6. Be Aware Of Contractor’s Financial Situation

→ Ensure the party paying you is financially stable.

Research their financial status and consider contracts with legal payment guarantees. After all, you want to be paid once you perform.

7. Contracts Are Negotiable

→ Proposals can be amended before signing.

The point of maximum negotiation power is just before the contract signature. Preserve evidence of changes made to a written contract.

8. Document Contractual Changes

→ Always document contract amendments in writing.

Avoid relying on verbal communications. Most contracts have clauses that recognize only written changes.

9. Keep Good Records

→ Document all activities related to contract performance, including deliveries, payments, and communication with the contractor.

This documentation can be crucial in disputes.

10. Maintain Open Communication

→ Good communication with the other party is essential.

This helps resolve uncertainties, address payment delays, and navigate challenges that could affect contract fulfillment.

For best outcomes, approach production contracts with caution, clarity, and understanding.

Keep good records and open communication, which are keys to any business relationship.

ESP SPOTLIGHT

Endorsed Service Providers are pivotal to the Braintrust Ag community. These industry experts know their professional services niche and how they directly impact farmers, ranchers, and other ag business owners.

This week, I’d like to direct your attention to ESP, Devin Patton with Husk Trading.

If you’d like to learn more about the ESP program, click here.

SUCCESSION/TRANSITION

FINANCE

Most folks are familiar with the FSA Beginning Farmer program, but I want to point out that many states have state-specific programs as well.

Here’s an example I came across this past week in Minnesota:

Minnesota has an incentive to sell or rent land & other ag assets to beginning farmers.

The MN Beginning Farmer Tax Credit is:

• 8-12% of land sale price (max $50K)

• 5% of other asset sale price (max $32K)

• 10% rental income for 3 yrs (max $7K/yr)

• 15% share crop value for 3 yrs (max $10K/yr)

A "beginning farmer" is someone:

• main operator

• farming < 10 yrs

• net worth < $800K

• enrolled in financial management course

• not directly related to owner/seller (except farmland)

I've no experience with this, just wanted to share this program. Sounds like a good idea, although bureaucracy tends to get in the way of good ideas...

Again, this is just an example for MN, but many states have other programs to help young, beginning farmers & ranchers.

Please share with the group programs you’re aware of in your state.

MEME OF THE WEEK

That’s a wrap, folks.

Until next week, thank you to everyone involved in ag. Come engage on the new platform & let’s grow profitable ag businesses together.

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DISCLAIMER: All content, communications, and resources provided by Braintrust Ag, its principals, operators, or members is intended to merely be educational and entertaining. Nothing published by Braintrust Ag should be relied on as legal, financial, investment, or other professional advice. Investments and legal matters involve substantial risk and are not suitable for all individuals. It is recommended to enter into a client relationship with an ESP for obtaining professional advice. 🗞️🗞️