# Getting into farming: the money side

A free short course from Farm CFO by Clunes Rural. 5 lessons, about 25 minutes in all. No sign-up.

Work out what it costs to start farming, ways in without buying land, a first budget, and how to keep enough cash in the early years.

Who it's for: People planning to start their own pig, cattle or sheep business in Australia, with little or no land of their own yet.

You'll be able to:
- List the four big start-up costs and know which ones you can put off
- Compare leasing, share farming, agistment and working on a farm
- Build a simple start-up budget and see if the numbers stack up
- Tell cash from profit, and find the low point in your bank balance

## Lesson 1: What it costs to start farming

Most people who want to farm can do the farming. The hard part is the money. This lesson sets out what you'll need to pay for, so you can see the size of the job before you start.

## The four big costs

There are four big costs in a new livestock business.

1. **Land.** This is the biggest cost by far if you buy it. Most new farmers don't buy land at first. The next lesson covers the ways around it.
2. **Stock.** The animals you'll run. If you lease land, stock is often your main cost.
3. **Plant.** The gear you need to do the work. Think a bike or side-by-side, dogs, yard panels, a drench gun and a trailer.
4. **Working capital.** This is the cash you need to pay the bills until your stock are sold. It's the one people forget, and the one that catches them out.

## Getting a feel for prices

Free farm budgets from NSW DPIRD (the NSW Department of Primary Industries and Regional Development) give you a starting point. The [2025 budget for first-cross ewes](https://www.dpird.nsw.gov.au/__data/assets/pdf_file/0011/1674461/1st-Cross-ewe-Terminal-Ram-1000-Ewes.pdf) uses $248 a head for replacement ewes and $2,000 for a terminal ram. A terminal ram is a meat breed ram whose lambs are all sold, not kept.

Those are guide prices for that budget, not quotes. Prices change week to week. Ring a stock agent for what's selling in your district this month.

## Why working capital matters so much

Farm income comes in lumps. You might sell lambs once a year, or steers once they reach weight. But fuel, rent, drench and the phone bill come every month. Working capital is what carries you through the gap.

The way to find the right amount is a monthly cashflow. That's a list of the money going in and out each month, with your bank balance at the end of each one. We cover it in lesson 4.

## What you can put off

You can put off buying land. You can buy second-hand plant, or borrow gear from a neighbour at first. You can't skip working capital. Starting without enough cash is one of the most common ways a new farm business gets into trouble.

Start with your own numbers in the free [start-up budget spreadsheet](https://farmcfo.com.au/downloads/farm-cfo-start-up-budget.xlsx). For more detail, read our guide to [getting started in farming](https://farmcfo.com.au/guides/getting-started-in-farming).

### Worked example

This is an invented sheep business, and the figures are illustrative. Sam leases 100 ha and buys 300 first-cross ewes already in lamb, plus six terminal rams. Sam keeps an off-farm job to cover living costs.

| Cost | How it's worked out | Amount |
|---|---|---|
| Ewes | 300 × $250 | $75,000 |
| Rams | 6 × $2,000 | $12,000 |
| Plant | Second-hand bike, two dogs, yard panels and handling gear | $18,000 |
| Working capital | The most cash Sam's first-year cashflow needs before the lamb cheques, rounded up | $60,000 |
| **Total** | | **$165,000** |

There's no land in the table. The lease is paid out of the working capital. Working capital is the second biggest line, after the ewes.

Download the start-up budget: https://farmcfo.com.au/downloads/farm-cfo-start-up-budget.xlsx

### Check your understanding

1. Which start-up cost do new farmers most often forget?
   Answer: Working capital, the cash to pay bills until stock are sold. Stock and plant are easy to picture. Working capital is less visible, but without it you can't pay the bills while you wait for your first sale.
2. A budget lists replacement ewes at $248 a head. What should you do with that figure?
   Answer: Use it as a starting guide, then ask a stock agent for current local prices. Published budgets give a sensible starting point, but prices change. A stock agent can tell you what's selling in your district now.
3. In Sam's example, which cost could Sam put off by leasing?
   Answer: Buying land. Leasing means Sam doesn't buy land. Sam still needs stock, plant and cash to carry the business until the lambs are sold.

## Lesson 2: Ways in without buying land

Land ties up a lot of money in one thing. If you borrow to buy it, the repayments start straight away, good season or bad. That's why most new farmers start on someone else's land. Here are four common ways in.

## Leasing

You rent a block for a set time and run it yourself. You pay rent, and usually some costs such as fences and water, depending on the lease. The [NSW Government](https://www.nsw.gov.au/business-and-economy/running-a-business/renting-a-property-for-business/agricultural-tenancies) calls this an agricultural tenancy. It covers leases, licences, handshake deals and share farming. It strongly recommends putting the terms in writing.

The main risk is that rent is due whether it rains or not.

## Share farming

The owner supplies the land and assets. The share farmer supplies labour and skills, and often machinery. You share the income and some of the costs. The NSW Government notes that if seasons or prices are poor, both sides earn less. You usually need less money up front than for a lease.

## Agistment

Agistment means paying a landholder to graze your stock on their land. The [NSW Young Farmer Business Program](https://www.youngfarmer.nsw.gov.au/toolkits/leasing-and-agistment-toolkit) lists four common ways to charge it:

- dollars per head per week
- dollars per DSE per week (DSE means dry sheep equivalent, a measure of how much an animal eats)
- a percentage of weight gain
- a share of profit.

Agistment often needs the least money, because you only need stock and a cash buffer. The risk is that someone else is looking after your animals, and the landholder may end the deal when their own feed runs short.

## Working on a farm first

You take a job as a farmhand or manager. You earn a wage and risk none of your own money. You can save for stock while you learn. Some people run a few head of their own on agistment at the same time. It's slower, but the lessons are cheaper.

## Get it in writing

Whatever you choose, write down who pays for what, who does what, and how either side can end the deal. Have a solicitor check it before you sign. The Young Farmer Business Program toolkit has a sample agistment agreement and checklists.

Our guide to [ways into farming](https://farmcfo.com.au/guides/ways-into-farming) covers each option, plus partnerships and family succession. If you're weighing up buying against leasing, try the [buy or lease land calculator](https://farmcfo.com.au/tools/buy-or-lease-land).

### Worked example

This is invented, and the rates are illustrative, not market rates. Jo wants to run 50 steers for 30 weeks and has two offers.

**Agistment.** The landholder charges $3.00 a head a week. That's 50 × $3.00 × 30 weeks = $4,500, or $90 a head.

**Lease.** A 40 ha block costs $250 a hectare a year, which is $10,000. Jo would also pay $1,500 for fence and water repairs. That's $11,500, or $230 a head for the same 50 steers.

Agistment is $7,000 cheaper for this mob. But with the lease, Jo controls the paddocks all year and could run more stock. Jo puts both options into a budget before deciding.

Try the buy or lease land calculator: https://farmcfo.com.au/tools/buy-or-lease-land

### Check your understanding

1. Why do many new farmers start without buying land?
   Answer: Buying land ties up a lot of money, and loan repayments start straight away in any season. Land is the biggest cost. Starting on someone else's land lets you spend your money on stock and a cash buffer instead.
2. In a share farming deal, what happens in a poor season?
   Answer: Both sides usually earn less. Share farmers and owners share the income, so a poor season or poor prices cut income for both.
3. Jo's agistment costs $4,500 and the lease costs $11,500. What else should Jo weigh up?
   Answer: Who controls the paddocks and whether the deal could end in a dry spell. Cost matters, but so does control. On agistment, the landholder may end the deal when their own feed runs short.

## Lesson 3: Your start-up budget

A start-up budget answers one question: will this pay? It's a plan for a year's income and costs. You build it in three steps.

## Step 1: The gross margin

A gross margin is the income from one enterprise, less the costs that go up and down with it. An enterprise is one part of the farm business, such as a breeding herd or a mob of trade steers.

[NSW DPI](https://www.dpi.nsw.gov.au/agriculture/budgets/about) defines a gross margin as "the gross income from an enterprise less the variable costs incurred in achieving it". Variable costs are the ones that change with the number of animals. Think stock purchases, drench, feed, agistment, freight and selling costs.

Start from a NSW DPIRD budget that's close to what you'll run. Then change the numbers to your own prices and your own place. DPI says its budgets are a guide only.

## Step 2: The overheads

Overheads are costs you pay whatever the size of the mob. Think vehicle costs, insurance, rates, phone and the accountant. Make the list as complete as you can. Missing overheads is a common reason a first budget looks better than real life.

## Step 3: Interest

If you borrow to buy stock, add the interest. Interest is what the lender charges you for using their money.

Gross margin, less overheads, less interest, gives you the profit for the year. If you pay yourself from the farm, take out drawings too. Drawings are the money you take for living costs. Our [household drawings calculator](https://farmcfo.com.au/tools/household-drawings) helps you work out a fair figure.

## Be honest with the numbers

- Use a sale price a bit below what the agent expects. A budget that only works at record prices isn't a safe budget.
- Allow for some deaths.
- Test a bad year. Drop the sale price by 10% or 20% and see what's left.

If the budget only works when everything goes right, it's better to find that out now, before you buy stock.

Our guide to [your first farm budget](https://farmcfo.com.au/guides/first-farm-budget) builds a full budget step by step. For trade cattle, try the [cattle trading margin calculator](https://farmcfo.com.au/tools/cattle-trading-margin). For sheep, there's the [sheep gross margin calculator](https://farmcfo.com.au/tools/sheep-gross-margin).

### Worked example

This is an invented cattle trade, and the figures are illustrative. Jo buys 50 steers at 300 kg and $4.00/kg, which costs $60,000. One dies. The other 49 sell 30 weeks later at 460 kg and $3.80/kg, for $85,652.

| Variable costs | Amount |
|---|---|
| Freight in, 50 × $25 | $1,250 |
| Agistment, 50 × $3.00 × 30 weeks | $4,500 |
| Animal health, 50 × $20 | $1,000 |
| Selling costs, 49 × $60 | $2,940 |
| **Total** | **$9,690** |

The gross margin is $85,652 less the $60,000 purchase and $9,690 in costs, which is $15,962. Jo's overheads are $5,000 and the interest on a $40,000 stock loan is $1,800. That leaves a profit of $9,162.

Try the cattle trading margin calculator: https://farmcfo.com.au/tools/cattle-trading-margin

### Check your understanding

1. Which of these is a variable cost for a mob of trade steers?
   Answer: Agistment charged per head per week. Agistment per head goes up and down with the number of steers. Insurance and the accountant are overheads, paid whatever the mob size.
2. Why is a gross margin not the same as profit?
   Answer: It leaves out overheads and interest. A gross margin only takes off variable costs. You still need to take off overheads and interest to get profit.
3. What's the safest sale price to use in a start-up budget?
   Answer: A price a bit below what the agent expects. Prices move. A budget that still works at a slightly lower price is far more useful than one that needs everything to go right.

## Lesson 4: Cash and profit in the early years

Profit and cash are not the same thing. In the first few years, cash is the one that matters most.

## What's the difference?

Profit is what's left over across a whole year, after all costs. Cash is the money in your bank account on any given day.

You can make a profit for the year and still run out of cash in the middle of it. That's because farm income comes in lumps. A cattle business might sell steers once a year. A sheep business might get a lamb cheque in autumn and a wool cheque once a year. The bills come every month.

## Things that move cash but not profit

Some payments come out of the bank but aren't counted as a cost in the profit figure.

- **Loan principal.** Principal is the amount you borrowed. Paying it back takes cash, but it isn't a cost in the profit.
- **Buying gear.** A $10,000 bike takes $10,000 of cash today. In the accounts, the cost is spread over the years you use it. That spread is called depreciation.
- **Drawings.** Money you take out for living costs. It's not a farm cost, but it still leaves the account.

Tax can also change when cash goes out. That's a question for your accountant.

## Find the low point

The key question in year one is: what is the lowest my bank balance gets, and when? That low point tells you how much cash or overdraft you need.

An overdraft is a limit on your account that lets you go below zero up to a set amount. You pay interest on what you use. A lender will want to see your cashflow before setting one up.

## How to build a cashflow

1. Start with the cash in the bank on day one.
2. Put each sale in the month the money will actually arrive.
3. Put each cost in the month you'll actually pay it.
4. Work out the closing balance for each month. That's the balance at the end of the month, and it becomes next month's opening balance.
5. Find the lowest month. Plan to cover it with some room to spare.

Then test it. What if the sale is a month late? What if the price is 15% lower? If the low point goes below what you can cover, change the plan before you start.

Use the free [cashflow forecaster](https://farmcfo.com.au/tools/cashflow-forecaster) to build your own. Our guide to [overdrafts and seasonal finance](https://farmcfo.com.au/guides/overdrafts-and-seasonal-finance) explains how those facilities work.

### Worked example

This continues Jo's invented cattle trade from lesson 3, by quarter. Jo starts with $25,000. The $40,000 loan pays most of the steer purchase, and Jo pays the other $20,000 in cash.

| Quarter | Cash in | Cash out | Closing balance |
|---|---|---|---|
| Jul to Sep | $0 | $23,500 | $1,500 |
| Oct to Dec | $0 | $3,500 | $2,000 overdrawn |
| Jan to Mar | $0 | $3,500 | $5,500 overdrawn |
| Apr to Jun | $85,652 | $45,990 | $34,162 |

April to June includes repaying the $40,000 loan. Jo ends $9,162 ahead, which matches the profit. But in March, Jo is $5,500 overdrawn. Jo needs a bigger buffer or an overdraft before buying the steers.

Try the cashflow forecaster: https://farmcfo.com.au/tools/cashflow-forecaster

### Check your understanding

1. Jo makes a $9,162 profit but is $5,500 overdrawn in March. How is that possible?
   Answer: Costs come every month but the sale money only arrives at the end. The steers are paid for and fed for months before they're sold. Cash runs low before the sale cheque arrives, even though the year makes a profit.
2. Which payment takes cash but is not a cost in the profit figure?
   Answer: Repaying loan principal. Principal is the money you borrowed. Paying it back reduces your bank balance, but it isn't a cost of running the farm.
3. What's the most important number a first-year cashflow shows you?
   Answer: The lowest your bank balance gets, and when. The low point tells you how much cash or overdraft you need to get through the year safely.

## Lesson 5: Setting up the business and getting help

Some paperwork has to be done before the stock arrive. Start a few months early, because some steps take time. Rules differ between states, so check with your own state's agencies. Here's a starter list, based on NSW.

## Before you buy stock

- **Business structure.** You might trade as a sole trader, partnership, company or trust. Each one has different tax and legal effects. Talk to an accountant and a solicitor before you choose.
- **ABN.** An ABN is an Australian Business Number. You apply online through the [Australian Business Register](https://www.abr.gov.au/business-super-funds-charities/applying-abn). Not everyone is entitled to one. The ABR may ask for evidence that you've started, or taken steps to start, your business.
- **GST.** Ask your accountant whether you need to register for GST, the tax on most goods and services.
- **A separate bank account.** Put every farm sale and bill through it. It keeps the books clean and shows the farm's own cashflow.
- **PIC.** A PIC is a Property Identification Code. In NSW, every property where livestock are kept needs one, even if the animals are pets. [Local Land Services](https://www.nsw.gov.au/departments-and-agencies/local-land-services/payments-and-permits/apply-for-a-property-identification-code) assigns them. Ring 1300 795 299.
- **LPA.** Livestock Production Assurance is the red meat industry's on-farm assurance program. You need LPA accreditation to get National Vendor Declarations (NVDs) for cattle, sheep and goats. An NVD is a legal document that goes with stock when they move. It records their food safety and treatment status. [Integrity Systems Company](https://www.integritysystems.com.au/on-farm-assurance/accreditation/renew-accreditation/) says the fee is $90 plus GST. From 1 September 2026, you must also upload or create a farm biosecurity plan.

## When stock move

[Integrity Systems Company](https://www.integritysystems.com.au/identification--traceability/eID/meeting-nlis-requirements/) says every time livestock move off a PIC, the move must be recorded on the NLIS database within 2 days. NLIS is the National Livestock Identification System, which tracks stock between properties. That includes moves between properties you own.

## Keep records

[business.gov.au](https://business.gov.au/finance/accounting/record-keeping) says most business records must be kept for 5 years. Keep sales, costs, bank statements and stock records. A stock record is a running count of animals bought, born, sold and died.

## Where to get help

- **An accountant who works with farmers** for structure, tax and GST.
- **A solicitor** for leases and agreements.
- **Local Land Services** for your PIC and biosecurity advice.
- **The [NSW Young Farmer Business Program](https://www.youngfarmer.nsw.gov.au/toolkits/leasing-and-agistment-toolkit)** for free toolkits.
- **The [Rural Financial Counselling Service](https://business.gov.au/expertise-and-advice/Rural-Financial-Counselling-Service-RFCS)** for free, confidential help if you're in or at risk of financial hardship. Ring 1300 771 741.

Our [farm business setup checklist](https://farmcfo.com.au/guides/farm-business-setup-checklist) has the full tick list. Once you're trading, the [monthly money routine](https://farmcfo.com.au/templates/monthly-money-routine) keeps the books on track.

### Worked example

This is an invented first-year admin budget, and the figures are illustrative apart from the LPA fee. Mia is starting a small sheep business and lists the set-up and running costs that are easy to forget.

| Item | Amount |
|---|---|
| LPA accreditation, $90 plus GST | $99 |
| Accountant, including advice on structure | $2,500 |
| Bookkeeping software, 12 × $40 a month | $480 |
| Farm insurance | $1,800 |
| **Total** | **$4,879** |

Mia adds the $4,879 to the overheads in her budget and puts each payment in the right month of her cashflow. She starts the paperwork in March, three months before the ewes arrive.

Get the monthly money routine: https://farmcfo.com.au/templates/monthly-money-routine

### Check your understanding

1. You're leasing a block in NSW to run sheep. Does the block need a PIC?
   Answer: Yes, every property where livestock are kept needs one. In NSW, any property where livestock are kept needs a PIC, whoever owns the land. Local Land Services assigns them.
2. Why do cattle and sheep producers need LPA accreditation?
   Answer: It gives access to National Vendor Declarations, which go with stock when they move. Only LPA accredited producers can get NVDs. An NVD records the food safety and treatment status of stock as they change hands.
3. Who should you ask about which business structure and GST setup suits you?
   Answer: An accountant, with a solicitor for the legal side. Structure and GST depend on your own tax and family situation. That's a question for your accountant, with a solicitor for the legal side.

## Next step

New to farming: https://farmcfo.com.au/new-to-farming

## Sources

- [NSW DPIRD, 1st cross ewes, terminal meat rams, farm enterprise budget 2025 (1,000 ewes)](https://www.dpird.nsw.gov.au/__data/assets/pdf_file/0011/1674461/1st-Cross-ewe-Terminal-Ram-1000-Ewes.pdf)
- [NSW DPI, About gross margin budgets](https://www.dpi.nsw.gov.au/agriculture/budgets/about)
- [NSW Government, Agricultural tenancies](https://www.nsw.gov.au/business-and-economy/running-a-business/renting-a-property-for-business/agricultural-tenancies)
- [NSW Young Farmer Business Program, Leasing and Agistment Toolkit](https://www.youngfarmer.nsw.gov.au/toolkits/leasing-and-agistment-toolkit)
- [Australian Business Register, Applying for an ABN](https://www.abr.gov.au/business-super-funds-charities/applying-abn)
- [NSW Local Land Services, Apply for a Property Identification Code](https://www.nsw.gov.au/departments-and-agencies/local-land-services/payments-and-permits/apply-for-a-property-identification-code)
- [Integrity Systems Company, Renew LPA accreditation](https://www.integritysystems.com.au/on-farm-assurance/accreditation/renew-accreditation/)
- [Integrity Systems Company, National Vendor Declaration (NVD)](https://www.integritysystems.com.au/on-farm-assurance/national-vendor-declaration-nvd/)
- [Integrity Systems Company, Meeting NLIS requirements](https://www.integritysystems.com.au/identification--traceability/eID/meeting-nlis-requirements/)
- [business.gov.au, Record keeping](https://business.gov.au/finance/accounting/record-keeping)
- [business.gov.au, Rural Financial Counselling Service (RFCS)](https://business.gov.au/expertise-and-advice/Rural-Financial-Counselling-Service-RFCS)

General information only, not financial, tax, legal or credit advice. These courses are not nationally accredited training.