You’ve fallen in love. You’ve bought some alpacas.
You spent all summer having the time of your life.
What else should you think about doing?
by Robin Day, Luna Rosa Ranch Suri Alpacas
Establish a business name. Make sure your farm business name is available for use in your state – check with the department that grants business licenses. Also, since the alpaca market is a national one, you’ll probably want to change it if there is already another similarly-named alpaca farm – check multiple farm alpaca listing sites such as AlpacaNation.com and AlpacaStreet.com, and check with the Alpaca Owners and Breeders Association and with the Alpaca Registry.
Get a business license. It helps establish that you intend to make a profit with your alpaca business. In many states the application can be made online and the cost is nominal.
Consider what sort of legal entity you want to be and set this up. “Ma and Pa Farmer” works fine for the majority of breeders, but some breeders form LLCs or partnerships. One aspect to be aware of in considering whether to form a corporation is that you can’t use business depreciation and startup expense to offset personal earned income. Also, assets owned by a corporation may not be considered when applying for personal credit. Talk to knowledgeable tax and legal advisors.
Find a tax accountant that specializes in farms. Ideally, find an accountant familiar with the alpaca industry – contact nearby alpaca farms and ask who does their taxes. Have your business taxes done professionally – it is far too complicated for an individual to be able to figure out all the ways to handle depreciation and sales reporting. Meet with the accountant before tax season and develop a list of farm tax categories for tracking your expenses and income. Then, keep track. There are computer programs available for tracking business income and expense, some developed for farms. However, this need not be complicated. Many small alpaca businesses use some system of envelopes in a box. The important thing is to figure out a record-keeping system that works for you and use it.
Open a business bank account. Keep business expenses and income separate from personal funds. Before you have cash flow from sales, transfer from your personal account to your business account with the notation “transfer in of cash from owner” and use business checks for all your business expenses. Get a business credit or debit card as well.
Check with your home owners insurance company about your liability coverage. Most won’t provide liability coverage for your business activities. Even if you don’t plan to have sales or ranch visitors for awhile, adequate liability coverage is important to protect you from unforeseen events (animal gets out and car hits it and car occupants are injured, etc). Sometimes liability coverage can be purchased separately. You may want to switch to a farm policy with farm liability coverage (good news – these are often cheaper and cover more that standard home owners policies). If you have bought major farm equipment such as tractors or animal trailers, make sure these are included on your farm policy coverage.
Investigate commercial auto insurance. If you have bought a farm vehicle such as a pickup or trailer for use in your alpaca farm business, commercial automotive coverage from your farm insurance company may be more economical than including them on your personal auto policy.
Consider livestock mortality insurance. If you are paying for your alpacas over time, chances are your purchase contract required this type of insurance with the seller listed as a loss-payee. If you have purchased alpacas outright or had crias born to your farm and don’t have mortality insurance consider adding it to protect your investment. We usually recommend new breeders insure their herd at least until their sales pay back their initial investment.
Contact your county extension office. These offices are full of free help and some times they even have grants to cover the cost of things like irrigation or waste treatment. In some parts of the country it is mandatory to work with them as there are huge environmental implications with farm waste run-off, etc. Consider asking for advice on a farm site development plan. Often there is a weed control agency at the county level and frequently you can get someone to come out and check your property for poisonous weeds and plants. The extension offices provide many useful services – they can test your soil for fertilizer recommendations, send in your pasture grass for testing (some household grass is poisonous to livestock) or help you set up a composting system.
Investigate your property tax rate. In many areas there are lower tax rates for farms and open space and there are provisions for converting a property to a “current use” farm tax rate or open space rate, after you have several years of an established farm business.
Refine (or develop) your business plan. This is important for your profitability and helps establish your intent to make a profit. Community colleges often have advisors and workshops that can help with this and there are sometimes alpaca-specific workshops at conferences and shows.
Set up some system of animal record-keeping. There are several computer programs for sale from alpaca vendors that can help with this. Many breeders make up their own record format using an Excel spread sheet or Word document. For each animal, you want to record vaccinations, fecal tests results and any worming, weight, medical treatments, breedings, births, show records, shearing weights, fiber tests, etc.
Develop an internet business presence. This can be a simple farm page listing on sites that list multiple alpaca farms, such as AlpacaNation.com and AlpacaStreet.com. You don’t have to build your own website. You can get a free email address with your business name at Yahoo or the like.
Get business cards. Basic cards without logos are available for around $20 from mail order stationary companies like colorfulimages.com. Many retail printing companies will design logo graphics for free if you order cards from them. Get the smallest quantity available as you will want to make changes as your farm develops.
Develop sales contracts. Some of the alpaca multi-farm listing sites have samples posted, and you’ve already collected some from your own purchases. You will need contracts for proven females, maiden females, proven stud males, unproven breeding stock males, pets. Have an attorney in your state review your contracts. This is especially important if you are going to finance buyers (if financing, the contract should spell out that the seller is legal owner until the last payment is made and registration is transferred; define when the contract is in default, and spell out that the animal returns to seller if the contract is in default).
Research your fiber options. Make plans from the beginning to use your fiber. There are private buyers. There are co-ops, mini-mills and projects worthy of donation such as the Student Design Competition and The Alpaca Blanket Project. Don’t just let it sit there – get it out and promote the alpaca industry.
Get active in the alpaca community. Seek out your local alpaca groups. Go to meetings and events. Go to shows. Volunteer. You’ll learn a lot and more than likely make some sales contacts.
Promote alpacas in your community. Invite community groups to visit your ranch. Give tours to school children. Participate in National Alpaca Farm Day.
Luna Rosa Ranch Suri Alpacas
Breeding Quality Colored & Patterned Suris
The Luna Rosa Suri . . . When only the finest will do.
Updated December 19, 2012