coaxing profits from your farm - ellen polishuk
TRANSCRIPT
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Coaxing More Profit from Your Farm: JustBecause It Sells Doesn’t Mean It’s Profitable!
CFSA Annual Conference
November 2015
Ellen Polishuk
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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
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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%)
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what’s your limiting factor?
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what’s MY limiting factor?
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I sold out of carrots in 2 hours, I should grow more, right?
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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?
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profitability is
a state of mind
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This is Not The Truth
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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
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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
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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
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Crops I thought were okay and maybe they aren’t
• Dill, cilantro (transplanted)
• Radish, turnip, beets
• Garlic
• Scallions
• Lettuce head
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What are reasons for Losers?
• YIELD PROBLEM?
• COST PROBLEM?
• PRICE PROBLEM?
• SALES PROBLEM?
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Yield problem
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Yield Problem
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Cost Problem
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Cost Problem
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Price Problem?
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Sales Problem?
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What about those carrots?
• My Breakeven Price is $4.20 per bunch
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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?
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Another Approach…….
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A key to comprehensive, whole farm cost approach is the assignment of every expense somewhere!
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• 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
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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
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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
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Veggie Compass Tutorial
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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
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Whole Farm Profit Report by Channel
Information:•Sales by channel•Profitability by channel•Unique expenses of Channel
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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
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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
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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
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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
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What records to start keeping
• Yield
• Sales
• Labor
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Getting Better and Better Recordsyield, labor, sales
• Good
– By crop
• Better
– By crop and by field
• Best
– By crop, by field, by channel
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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
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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!
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Basic PVF Timecard
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Super detailed
Daily timesheet
=paper deluge
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Where I’m headed:Google Docs?
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The Future
There’s an app for that!
Veg Compass
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Other Data Gathering Ideas on your farm
Swagging
Pulsing
Snapshot metrics
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Use other peoples numbers
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Is the Juice worth the Squeeze?
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You Can’t Manage What You Don’t Know
Get Some Numbers
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Production for Profit
Using Records and Your Farming Know How to Increase Profits
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3 Main Avenues to Improve Profits
• Increase Revenue
• Reduce Operating Cost
• Reduce Overhead (another day’s topic)
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Increasing Revenue
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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
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Increase production
• yeah, but…
only of crops that are profitable and that you can sell!
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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
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Increasing Yield
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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
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My Yield Data
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My Planting Log – by Bed Feet
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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!
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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
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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…
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What’s keeping you from raising your price?
What are you selling?(Check Your Value Statement)
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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
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Sales Problem?
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Sales Problem?
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Are you a Market maker or a Market taker?
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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
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3 Main Avenues to Improve Profits
• Increase Revenue
• Reduce Operating Cost
• Reduce Overhead
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Reducing Operating CostsWithout Impacting Yield or Quality
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This is how I know my cost of production is wonky
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Cost Problem
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Cost Problem
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Cost Problem?
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Cost Problem?
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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
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2 choices on labor expense
Either spend less on labor
Or
Get more out of every labor dollar spent
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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
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Just What are Your People Doing?
Pick and Pack60%
Grow30%
Market10%
Labor Distribution on Successful Mixed Vegetable Farms from Midwest
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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
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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
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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
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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
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You Can’t Manage What You Don’t Know
Get Some Numbers