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