A farm’s sustainable growth rate depends on the farm’s return on equity and its components. A farm with a higher profit margin, a higher asset turnover ratio, a higher ratio of assets/equity, and/or a lower percentage of owner withdrawals to net farm income will have a higher sustainable growth rate.

Start-up challenges may include cash flow shortages and depleted working capital, operational inefficiencies, and management bottlenecks. Comparing and contrasting these challenges among expansion options helps mitigate potential start-up challenges.

Expansion is likely to impact farms in numerous ways. Each expansion option should be evaluated in terms of its impact on the farm’s financial statements, financial performance, and managerial attention and oversight.

The business model a farm uses when expanding the operation is not just limited to the traditional organic or internal growth model. Today’s environment provides opportunities to experiment with other business models.

Retained earnings, net farm income remaining after operator withdrawals, off-farm income, transfer of funds into the business, and debt financing can be used for farm growth. When using debt, is important to consider how risk is impacted by leverage.

When evaluating farm growth options, it is imperative that a farm evaluate the skills and competencies needed to grow. These skills are often more limiting than capital, and can become spread very thin.