If you are considering turning your goat hobby into a business, either a milk or cheese dairy, then you are probably trying to find the answer to one very important question,
what’s it going to cost to build? You have probably already figured out that there are no easy, one-size-fits-all answers to this question, but hopefully I can give you some idea of just what you might have to face.
The first thing I would like to encourage you to do is to take the time to create a business plan, or at least a basic summary of estimated costs, expenses, and income. It is a boring, sometimes mind numbing process (especially for those of us who would rather be out with our goats), but it is really worth the time. Even a simple summary will give you a rough idea of the feasibility of your project- before you make a choice you might regret.
To help you develop a projection of costs, lets go over the major areas to consider when looking at start-up cost; review three real-life examples of recently built small cheese dairies; talk about some of the surprise cost areas; go over some of the most common finance related mistake; and finally look at some pointers on ways to reduce costs.
Seven Major Cost Considerations
As you can imagine, there is great variation in the cost of building an on farm cheese business. Here are seven areas that can greatly affect the cost. As you read these, you can start visualizing how your project fits into the spectrum.
- Owning (without debt) suitable property is of course the ideal situation.
- Mortgage and purchase costs- don’t forget to include these in your start-up cost estimate.
- Are there existing buildings that can be remodeled to meet licensing requirements? This will help reduce permit fees as well as building costs.
- If there are no suitable buildings, you will have more cost, but can build to suit your goals.
- Costs could range from $15,000 to well over $100,000 depending on many variables.
- Will the existing septic system accommodate an added bathroom?
- Will the local jurisdiction allow you to use a septic system for your dairy waste water?
- If a new system is needed, get cost estimates and permitting fees. Septic systems and permits can run anywhere from about $10,000-30,000.
- Is there adequate power supply to the buildings? If not, get some estimates from an electrician and/or the power company on having lines run.
- Remember that a dairy will add a large load to your power use, calculate increased power costs into your monthly budget projections. Estimate an increased cost of 200-500%
- If a well is present will it meet dairy inspection requirements?
- Will any type of water treatment be needed?
- Will the well provide enough water for the dairy’s needs?
- Well drilling costs and water treatment costs vary greatly, from a few thousand to many, call a local well drilling company to get some estimates.
- Farm insurance for a dairy can be hard to come by and very costly.
- Estimate about $500-$900.00 a month for full farm and liability insurance.
- Health insurance costs should be included as well, unless provided by a off-farm employed spouse.
- Operating Capital
- If you will have product to sell immediately, and a market for it, you won’t need much operating capital.
- If producing only aged and/or raw milk products (must be aged a minimum of 60 days) then you will need a budget for money to cover expenses until income matches costs.
Three Start-Up Stories
A dairy built from scratch, a old dairy brought back to life, and a backyard farm transformed into a micro-creamery; these three stories of real life farmstead creameries will help give you an idea of how wide the cost range can extend and the factors that influence the bottom line. Please note, these costs are rounded and approximate.
From Scratch- Pholia Farm Creamery,Oregon
Dairy Goal: Off-grid, raw milk cheese, 40 milking head Nigerian Dwarf Goats
Starting Assets: Full ownership of 25 acres of suitable land (no infrastructure).
Personal Assets: Military retirement income and health care, re-investment of profit from home sale of $280,000.
Personal Skills: Architectural drafting and design; building, plumbing, and electrical skills; and renewable energy installation experience.
Length of time from inception to licensing: Two years.
Creamery Description and Cost: 60×60 barn and creamery combined with finished loft space. Four doe (Nigerian Dwarf) sized parlor, small milk house, creamery, aging room, office, boiler and systems room, bathroom and laundry. Cost approx. $150,000.
Infrastructure Costs: Septic system $8,000. Well, pump and water storage tank $5,000. Off-Grid Power system, wood fired boiler, solar hot water panels, and propane on-demand water heater- installed by owner- $100,000.
Other Costs: Hay barn $7,000. Pens and shelters $2,000. Equipment $3,000. Epoxy wall coating $6,000. Used tractor $12,000. Gravel for roads and parking $3,000. Excavator and backhoe work $2,000. First years hay $7,000. First years insurance $5,000.
Owner Labor: Drew building plans, obtained permits, assisted with framing, did all electrical and plumbing, did all finish carpentry and drywall.
Production: 3000 lbs. aged raw milk cheese. Retail price $25-35.00/lb. High value goat herd helps offset other costs.
Summary: Total cost $295,000. We ended up having to take out a home equity loan to get our house started- we still are not done with it (four years later…).
Notes: Our costs were higher than most peoples due to our totally off-grid power system, but we have no power bills now and it is the way we want to live. Also, we built a aesthetically pleasing barn and adequately sized facility- we shouldn’t have to add on in the future. We continue to try to improve the animal housing, such as buck pens and dry yearling pens and we never seem to have enough gravel!
Dairy Redo- Former Cow Dairy Rejuvinated
Dairy Goal: Milk 10 Cows, 30 goats. Produce only raw milk cheeses for local market.
Starting Assets: Personal investment from spouse working full time off the farm.
Personal Skills: Building, plumbing and electrical skills.
Length of time from inception to licensing: Two years.
Creamery Description and Cost: Former cow dairy parlor and milk house was in good repair and needed minimal investment to bring up to code. Existing animal waste water system also operational. Goat milking parlor was installed in part of the cow parlor. Goat housing to be upgraded later. Cow housing existing. Creamery was built on existing slab, approx 40×30’. Minimal permit costs due to existing slab and electrical available. All work done by owners. Used equipment, doors, windows. Total initial cost $15,000.
Owner Labor: All work done by owners.
Notes: While initial cost was very low, continual upgrades have been made by the owners, including adding new floor surface to old slab, extensive aging rooms, and new housing and milking parlor for goats.
Backyard Business- A Hobby Goes Pro
Dairy Goal: Milk 15 goats, make pasteurized fresh cheeses for local market.
Starting Assets: Own property, goat herd, animal housing. Obtained construction loan using business plan.
Personal Skills: Construction, plumbing and electrical skills.
Length of time from inception to licensing: Three years.
Creamery Description and Cost: 384 square feet, milking parlor, milk house, and processing room. Waste water system, but no bathroom. 30 gallon pasteurizer, refrigeration, milking machine. $85,000.
Owner Labor: Drew plans, obtained permits, plumbing, and electrical.
Summary: Simple, but high quality initial building allowed for licensing. Room in plan provided for adding on additional rooms, such as office, dry storage for ingredients and packaging materials.
***Insert Photo: Laini Foundler at work in her creamery ***
Four Common Surprise Costs
- Wall, ceiling and floor finishes-Dairies require very durable, waterproof finishes that are quite costly.
- Sinks and other stainless equipment– used or new, these often cost more than you would expect and then sometimes don’t meet the inspectors requirements, meaning even more cost to have welds smoothed, grooves filled, and more.
- Refrigeration equipment– finding equipment and a technician capable of adapting it (if needed) to meet your requirements can be a challenge.
- Product loss– Plan on “losing” 10-15% of your product annually. Equipment failure (leading to product failure), animal health issues, failed batches of cheese, expired product, and samples and donations are some of the examples.
Common Finance Related Start-Up Mistakes
The first mistake is not doing a cost analysis before you start sinking money into the project! You may think that you are building your dream, so why make it less enjoyable by doing all that math and paperwork, but trust me, the dream will rapidly progress into a reality that includes financial stress, physical exhaustion, financial stress, no leisure time, and, you guessed it, financial stress. A bit of time invested now, will at the least prepare you somewhat for what you might be getting yourself into.
Another common mistake area is to build too small, not anticipate production level increases, and undersize equipment. Many cheesemakers begin adding on within a year or so of construction, or at least planning on adding on. Others realize very quickly that they want to grow their herd and production volume beyond what they had first planned, and often original equipment is outgrown very quickly. Again, this is an area that perhaps a well thought out business plan might help you avoid or at least better anticipate.
A Story of Undersized Equipment: Jan and Larry Neilson own a lovely, farmstead goat creamery inSweet Home,Oregon. Fraga Farm is the only certified organic goat dairy in the state and Jan is one of the pioneer farmstead cheesemakers inOregon. She shared her tale of woe regarding under-sized equipment:
“I bought the 15 gallon pasteurizer because I had no other choice: there just wasn’t any other small equipment available and I wanted to get started. It was too small from the beginning, but I made two batches a day until I a larger vat, then I made up to three batches a day almost seven days a week. After only two months I needed even bigger equipment. It was crazy since thre were only two other producers in Oregon doing goat cheese. I started with 20 goats, so I was pasteurizing like crazy! I had to increase the size of my heard within six months. There were a couple of times when I remembered making six batches in one day!” Jan went on to share that she can’t believe going through that didn’t maker her quit, that she was tempted to many times. Moral of the story: Look ahead and try to anticipate growth, even delaying licensing might be a better choice than burning out early.
The last of the most common money related mistake areas is to overestimate the amount of income that will be generated and to underestimate expenses. Once again, this is what the business plan is supposed to help you avoid! But it is always difficult to accurately anticipate just how much money you will make and how much it will cost you to do business.
A Story of Budget Woes and Wins: Jim and Gayle Tanner of Bonnie Blue Farm inTennessee did a very thorough business plan before building their lovely, well designed farmstead goat dairy. Gayle shares some of their experiences:
“Building and equipment costs exceeded our business plan by 200 percent, insurance was 300 percent more, feed and hay 400 percent more, utilities only slightly more, and supplies for packaging were 200 percent more. But we had good news too, gross sales exceeded our expectations by 200 percent for our first year and have increased ever since.” Gayle said they used their business plan to help obtain financing, including some grant monies. Moral of the story: Even with a lot of planning, expect surprises, but don’t neglect the planning.
Tips for Reducing Costs
- Start shopping for used equipment early in the process: Check restaurant suppliers, classified ads for restaurant auctions, dispersals, etc. Watch agricultural newspapers and internet auctions and classifieds. Best of all haunt internet chat lists related to small dairies to both watch for sales and to post what you are looking for.
- Prioritize projects: Can some improvements or additions be made after you are licensed and are producing income? If you do this, try to accommodate future expansion in your construction- for example, supply wiring and plumbing for an addition, provide adequate space in the circuit box for additional circuits, plan where you could add on if needed, etc.
- If you have construction experience (we got our first experience by volunteering for Habitat for Humanity and doing some home remodeling) ask if you can serve as one of the crew, or even consider being your own general contractor (sometimes referred to as owner-builder).
- Look for cost-saving construction options (such salvaged fiberglass door instead of new commercial type doors), but don’t sacrifice quality and longevity to save money, it won’t pay off in the long run.
As you have already figured out, the cost to build a small, on-farm cheese dairy varies greatly. Under some circumstances it can be done for as low as $15,000, these cases are rare and usually in need of upgrading very quickly. Remember, you are going to be spending a lot of time, more than you ever imagined, working in the facility you build. If it doesn’t function well, both ergonomically and in regards to product safety and quality, then you will not survive as a business (and often personal relationships suffer as well). Most small businesses take several years to turn a profit, this one is no different. You may work “for free” for many years before you actually start making any money. If, in the meantime, you can work relatively comfortably in a facility that you can be proud of, produce a product you are pleased with, and live a life that you find fulfilling then it will all be worth it!
Gianaclis, along with her husband Vern and their daughter Amelia, own and make cheese at Pholia Farm Creamery in Rogue River, Oregon from the milk of their herd of Nigerian Dwarf Goats. Gianaclis’ book “The Farmstead Creamery Advisor: The complete Guide to Building and Running a Small, Farm-based Cheese Business”, Chelsea Green Publishing, is available at bookstores, including Dairy Goat Journal’s, and online.
4 thoughts on ““What’s it Going to Cost?” A Look at the Cost of Building a Farmstead Creamery”
This is awesome! Thanks for the information. 🙂
Thanks Gianaclis Caldwell for the great article with lot of information,
I heard about NAHB economics and management expert team has collected many different financial statements from different builders across the country in their : http://ebooks.builderbooks.com/product/cost-doing-business-study-2014 text helps us to find the cost of sales, profits, business operating expenses etc.
Thank you for this great information. The planning is certainly not the most fun part but the rewards (I hope) will be worth it.
You’re welcome, It is a tough but rewarding job. -)