Coaxing More Profit from Your Farm: JustBecause It Sells Doesn’t Mean It’s Profitable!
CFSA Annual Conference
November 2015
Ellen Polishuk
Potomac Vegetable Farms
• Northern Virginia (DC area)• 2 Farms• 4 owners: Hana, Hiu, Ellen,
Carrie• 3 other permanent FT staff
– Many seasonal staff
• Ecoganic Methods• $1 million gross sales
Our Markets
• Farmers Markets 3/week (65% of income)
• 60 CSA members (7% of income)
• 1 roadside stand (14% of income)
• “Wholesale” to our sister farm operation (14%)
what’s your limiting factor?
what’s MY limiting factor?
I sold out of carrots in 2 hours, I should grow more, right?
How do you know what’s profitable for you?
• Individual crops and/or enterprises?
• In which market channels?
• In all seasons?
Is it all gut feeling or
do you have any facts?
profitability is
a state of mind
This is Not The Truth
Biggest Winners
2012 – Gut Feeling
Tomatoes:
◦ Hybrid, heirloom, cherry
Herbs:
◦ Perennial, basil, cilantro
Greens: lettuce head,
chard, spinach, mustard,
arugula
Summer squash
2014 – With DATA
Tomatoes:
◦ Hybrid, heirloom, cherry
Herbs:
◦ Perennial, basil, cilantro
Greens: lettuce head, chard, spinach, mustard, arugula, lettuce mix
Summer squash
Kale
Eggplant, Cucumber, Sweet Potatoes
The 2014 Winners Circlemost profitable by net profit % most profitable in total net profit Gross Profit
tomatoes, heirloom tomatoes, hybrid tomatoes, hybrid
tomatoes, hybrid tomatoes, heirloom tomatoes, heirloom
squash, summer squash, summer squash, summer
kale, loose potatoes lettuce mix
lettuce mix cucumber kale, loose
arugula herbs chinese greens
potatoes tomatoes, cherry tomatoes, cherry
cucumber lettuce mix arugula
spinach kale potatoes
tomatoes, cherry kale, loose cucumber
eggplant chinese greens mustard
sweet potatoes arugula herbs
cauliflower spinach spinach
chinese greens sweet potatoes eggplant
mustard mustard kale
herbs eggplant sweet potatoes
kale cauliflower collard
Biggest Losers
2012 – Gut Feeling
• Broccoli/Cauliflower
• Potatoes
• Beans
• Onions
• Cut Flowers
2014 – With DATA
• Broccoli/Cauliflower
• Potatoes
• Beans
• Onions, leeks
• Cut Flowers
• Beets
• Celeriac
Crops I thought were okay and maybe they aren’t
• Dill, cilantro (transplanted)
• Radish, turnip, beets
• Garlic
• Scallions
• Lettuce head
What are reasons for Losers?
• YIELD PROBLEM?
• COST PROBLEM?
• PRICE PROBLEM?
• SALES PROBLEM?
Yield problem
Yield Problem
Cost Problem
Cost Problem
Price Problem?
Sales Problem?
What about those carrots?
• My Breakeven Price is $4.20 per bunch
Which Channel Makes the Most Profit?
• Farmers markets are the most profitable channel by percent of sales and by total dollars earned
How Do I know This?
Another Approach…….
A key to comprehensive, whole farm cost approach is the assignment of every expense somewhere!
• Excel Spreadsheet
• Grower inputs data on 3 separate pages
• Page 1 = All expenses
• Page 2 = All Sales
• Page 3 = Labor hours and acreage by crop
Veggie Compass – How it is Organized
Veggie Compass – How it is Organized
• VC generates a farm financial picture on the next 3 pages
• Page 4 = Cost of production by crop
• Page 5 = Sales Output Page = Per Crop Profit and breakeven prices
• Page 6 = Profit and Loss Whole Farm and by Market Channel
Veggie Compass
Needs this Data from YOU
• Farm Expenses• Farm Sales by crop• Growing area of each crop• Crop specific expenses• # of plants in greenhouse• Total greenhouse labor hours• Labor hours by crop• Not Crop Specific hours
Veggie Compass Tutorial
Veggie Compass Gives You Back
Net Profit by market channel Cost of a crop before harvest Cost to harvest and pack each crop
Break even prices
Average Hourly Labor Cost
Whole Farm Profit Report by Channel
Information:•Sales by channel•Profitability by channel•Unique expenses of Channel
Breakeven PricePotatoes = $49.67 per 25 pound pony = $1.98/poundRadishes = $4.38 per bunchSweet Potatoes = $46.34 per pony = $1.85/pound
Pricing Guidance - Breakeven Price
Record Keeping Blues:Remedies for Losing It
• Keep systems simple and easy
• Designate one or two people to be responsible (and maybe you are not one of them!!)
• Accountability helps
For Detailed Task-by-Task Record Keeping
• Develop easy-to-use forms
• Make it part of your routine (SOPs)
• Do it every day or twice a day…do not put it off till tomorrow.
• Require employees to do basic record keeping such as recording field activities, harvest amounts, and tracking time by crop
Record Keeping Tools
Many options…find one that works for you OR works for your farm
– Log books (Examples: crop journal, mileage log)
– Calendar
– White board
– Time cards
– Spread sheets
– Financial software
– Hand-held electronic devices
What records to start keeping
• Yield
• Sales
• Labor
Getting Better and Better Recordsyield, labor, sales
• Good
– By crop
• Better
– By crop and by field
• Best
– By crop, by field, by channel
What records really matter for
profitability?
Biggest Overall Expense?
Labor
Most variable expense from crop to crop?
Labor
Hardest Expense to track?
Labor
Most critical factor for you as a business-owner?
Labor
Labor Records
• Good
– Keeping timecards and totaling labor hours
– Keeping track of your hours
• Better
– Tracking hours by activity: grow, harvest, sell
• Best
– Tracking hours by activity, and by crop!
Basic PVF Timecard
Super detailed
Daily timesheet
=paper deluge
Where I’m headed:Google Docs?
The Future
There’s an app for that!
Veg Compass
Other Data Gathering Ideas on your farm
Swagging
Pulsing
Snapshot metrics
Use other peoples numbers
Is the Juice worth the Squeeze?
You Can’t Manage What You Don’t Know
Get Some Numbers
Production for Profit
Using Records and Your Farming Know How to Increase Profits
3 Main Avenues to Improve Profits
• Increase Revenue
• Reduce Operating Cost
• Reduce Overhead (another day’s topic)
Increasing Revenue
How to Increase Revenue?
– Grow More = Increase Production
– Grow the same but Increase yield
– Grow the same but Increase price
– Grow the same but Sell it All
Increase production
• yeah, but…
only of crops that are profitable and that you can sell!
Increasing Revenue
– Grow More = Increase Production
–Grow the same but Increase yield
– Grow the same but Increase price
– Grow the same but Sell it All
Increasing Yield
Benchmarking Yield?
• Conventional Ag:– Knott’s Vegetable Guide
– University Crop Budgets (Iowa State)
• Smaller Scale Sustainable Ag:– The Market Gardener, Fortier
– Roxbury Farm Harvest Guide (on the web)
– Organic Farmers Business Handbook, Wiswall(20 crops)
– CFSA Crop Budgets
My Yield Data
My Planting Log – by Bed Feet
Other Yield Benchmark Ideas
• Your own data from the past
• Your Extension Agent’s eye
• Your Neighbors Eye
• What other Farms Look Like?– Hint hint – go visit other farms!
Increasing Revenue
– Grow More = Increase Production
– Grow the same but Increase yield
–Grow the same but Increase price
– Grow the same but Sell it All
Increase Price: A little change in price
can make a big difference….
Cost of production
Price Gross profit per bunch
Gross profit per 100 bunches
Percent increase in profitability
$1.00 $1.50 $0.50 $50.00 0
$1.00 $1.75 $0.75 $75.00 50%
$1.00 $2.00 $1.00 $100.00 100%
Bunched Chard, or Parsley or…
What’s keeping you from raising your price?
What are you selling?(Check Your Value Statement)
Increasing Revenue
– Grow More = Increase Production
– Grow the same but Increase yield
– Grow the same but Increase price
–Grow the same but Sell it All
Sales Problem?
Sales Problem?
Are you a Market maker or a Market taker?
PVF changes to our Basket of Goods
• CSA modifications
• Split seasons
• Add-ons
• Market style
• Pay by credit card
• Split payments
• Roadside Stand
• Secret stand
• Buy in more products
• Farmers Market
• Credit cards
• More produce in “shoulder” season
3 Main Avenues to Improve Profits
• Increase Revenue
• Reduce Operating Cost
• Reduce Overhead
Reducing Operating CostsWithout Impacting Yield or Quality
This is how I know my cost of production is wonky
Cost Problem
Cost Problem
Cost Problem?
Cost Problem?
Cost of ProductionComponents of Operating Cost on Successful
Multi-Species Vegetable Farm
Labor62%
Seed, fert, plants
12%
Machinery
8%
Marketing
9%
Misc
9%
Jim Munsch,2011
2 choices on labor expense
Either spend less on labor
Or
Get more out of every labor dollar spent
Getting more for your labor dollar
• Become a better manager!
• Get better labor;– Better pay, better
benefits
• Incentivize Productivity– Bonus, profit
sharing, power sharing, raises, praise, benefits
Just What are Your People Doing?
Pick and Pack60%
Grow30%
Market10%
Labor Distribution on Successful Mixed Vegetable Farms from Midwest
Swag vs Real Data
Harvest and Pack,
50%Growing
25%
selling25%
PVF Labor Distribution 2011 SWAG
Growing Farm Profits 2013, by Ellen Polishuk
Harvest, pack43%
Grow33%
Sell24%
2012 Labor Distribution at PVFActual Data
Knowing these numbers…
For all growers - Focus on how to make picking, packing and washing more efficient
For me - Spend less time on the growing
Labor Benchmark
Beets, bunching- Yield = ⅓ bunch per foot at 7200 bunches to the acre- Value = $1.50 per bunch at $10,800 per acre. Remainder is harvested for beets without tops at a value of another $4,000
Standards:- Harvesting: 30-40 bunches per hour per person depending on quality of theleaves @ approximately 200-250 hrs per acre in cutting plus loading andunloading boxes from and to washing area
Harvest: 30 bunches per hour TOTAL = 2.6 minutes per bunch Washing: 100 bunches per hour or 23 bunches per hour
From Roxbury Farm Harvest Guide
How to think about other production costs?
• Is lowering the cost of inputs NOT going to affect yield or quality?
• Is it worth your time to seek out these dollars?
• Seed• Fertilizer• Fuel• Tools• Supplies
You Can’t Manage What You Don’t Know
Get Some Numbers
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