PROGRESS: Calculated risk

PARKMAN, Ohio – Kevin O’Reilly wrote his first farm business plan in high school.
The Geauga County teen wanted to borrow $200 from his father to start a sweet corn enterprise, but before his dad would hand over the money, Kevin had to calculate his input and labor costs, create a sales plan and identify potential risks.
Now 37, O’Reilly is still putting pencil to paper, most recently to think through two big decisions: whether or not to quit the security of his part-time job with OSU Extension and whether to go out on a limb and start an onfarm feed business.
The numbers said “go for it.” And so in January, Little Ireland Feeds was formed and in late April, O’Reilly resigned as Portage County’s ag educator.
His own doing. O’Reilly didn’t inherit a farm and he didn’t marry into one, either.
Raised on a “little hobby farm” in Geauga County, O’Reilly had always been around agriculture and even helped his family build a sheep flock of 75 head.
He earned a bachelor’s and then master’s degree in animal science.
“I wanted to farm, but I didn’t know how,” he confessed. He joined the ranks of OSU Extension instead.
But that same year, 1994, he hoped to start farming part-time. He wrote a business plan and made the rounds to bank after bank. Each turned him down with the same refrain: He was too high a risk; he had no equity.
Undeterred, he kept going, driven by a desire to farm and, he jokes, the challenge to prove his mother wrong.
“My mother said it couldn’t be done,” O’Reilly said. “She knew it was hard to make money at it.”
“I took her on as a challenge.”
He finally found that first source of credit, then had to get credit lines for all his supplies, too.
In 1996, the same year he got married, he bought seven acres, a farmhouse and barn in shambles at a sheriff’s sale. He had his work cut out for him.
Although she has a farm background, Amy O’Reilly, who works for the Ohio EPA, warned her husband she was not going to support a farm “hobby.” But Kevin O’Reilly’s farming and financial smarts combined to build a solid farm foundation. The operation now includes roughly 1,000 acres in Parkman Township, nearly all of it rented.
“The farm has always paid for itself,” O’Reilly remarks with pride.
Tracking success. Building his farm, O’Reilly looked around. Through his extension contacts, he knew there were guys out there making money farming. How were they doing it? What were they doing?
“I looked at those guys and said ‘what are they doing right?'” O’Reilly wondered. “If they can do it, I can do it. Why not?”
In addition to financial skill, he discovered it was all in the timing, doing the work when it needs to be done.
“They’re very good at doing what needs to be done, and when it needs to be done,” he observed. “You have to be ready.”
Extensive records. O’Reilly keeps extensive financial and production data on every field, every input, every enterprise.
“I’ve given up rented ground that wasn’t making me money, either because of wildlife damage, drainage or fertility,” the young farmer said.
He keeps his pencil sharp and keeps accurate numbers to determine cost of production on his 420 acres of corn and 450 acres of soybeans. His cash grain operation includes another 50 acres of hay and 80 acres of wheat.
And he’s applying the same principles to his feed business.
He easily spends two to three hours each night in front of the computer, and another hour in the morning before heading outdoors. He’s computerized his inventories, routes, supplies, orders, and customer base, which now numbers more than 400.
Quick decision. The business idea developed almost overnight last winter, when the O’Reillys learned a local feed bagging and delivery business was closing Dec. 31.
The Soltis brothers had developed a feed mixing company, offering customers 100-pound bags of feed delivered to the farm. But when O’Reilly called them, they weren’t interested in selling the mixer or the trucks, but they did agree to work a deal for the feed rations and customer list, and sold O’Reilly remaining inventory.
For a numbers guy like O’Reilly, it was frustrating because he didn’t have a lot of information on the existing business to go on. He fell back on what he does best and put together a business plan to buy a grinder/mixer and truck, and by Jan. 13, Little Ireland Feeds was delivering its first bag.
“It had to be a quick decision,” he said. “We didn’t want to lose that customer base.”
So far, he’s mixed the same rations and kept the same supplier, and the customers stayed loyal. Many of the feed products, including a horse feed and chicken mineral mix, are exclusive to O’Reilly’s business.
Value-added. But the main reason he got into the feed business was to create a market for his own crops at a value-added price.
“That was the key to the whole business,” O’Reilly said.
“This was my opportunity to take advantage, basically, of retail farming,” he explained. “I can establish a price for my own crops now.”
Mixing his own feed, he can use his own grain. Last year, the Soltis Brothers used roughly 30,000 bushels of corn. This year, that corn can come straight from O’Reilly’s own fields.
“I don’t see any limits,” O’Reilly said. “If ground comes open and I can afford it, I’ll add more acres.
“It’s all dollars and cents.”
And it helps if you have a business plan.
(Editor Susan Crowell can be reached at 1-800-837-3419 or at editorial@farmanddairy.com.)