I’m writing this from Little Rock, Arkansas, where I am doing a presentation on farm financials for the Southern Sustainable Agriculture Working Group. It’s another in a string of presentations I signed up to do this winter, many of them with a focus on issues of scale in agriculture.
For beginning farmers especially, scale can cause significant problems as the business matures. Most of us get into this business to save the earth, get a feel for the soil, or simply to feed people – we don’t get into it to spend time crunching numbers at a computer, manage employees, or track down overdue payments.
Unfortunately – and I have a feeling that this happens to almost all small business owners – those are the very tasks that make or break a business, especially at the point when it needs to take a turn from being run on the constant over-exertions of the farmer and his or her dedicated crew.
So, one of the core messages I try to carry to beginning and expanding farmers is that they need to understand, at the outset, just how much they will eventually need to produce to sustain the quality of life they want to achieve; and since money is one sure way to unlock the flexibility and resources that can sustain an operation and a family, I focus on that.
If a market farming couple hopes to retain a $50,000 profit to cover their living expenses, mortgage, retirement savings, and such (this is a ridiculously low number based on the number of hours and level of risk assumed by most farmers, but I use it as an example because we tend to be a bunch with relatively low financial expectations), and market farms of their scale seem to average about a 40% margin, that means they’ll need to raise about $135,000 of vegetables – and that’s a lot more rutabagas than most of us got into farming thinking that we would be producing.
For beginning farmers especially, scale can cause significant problems as the business matures. Most of us get into this business to save the earth, get a feel for the soil, or simply to feed people – we don’t get into it to spend time crunching numbers at a computer, manage employees, or track down overdue payments.
Unfortunately – and I have a feeling that this happens to almost all small business owners – those are the very tasks that make or break a business, especially at the point when it needs to take a turn from being run on the constant over-exertions of the farmer and his or her dedicated crew.
So, one of the core messages I try to carry to beginning and expanding farmers is that they need to understand, at the outset, just how much they will eventually need to produce to sustain the quality of life they want to achieve; and since money is one sure way to unlock the flexibility and resources that can sustain an operation and a family, I focus on that.
If a market farming couple hopes to retain a $50,000 profit to cover their living expenses, mortgage, retirement savings, and such (this is a ridiculously low number based on the number of hours and level of risk assumed by most farmers, but I use it as an example because we tend to be a bunch with relatively low financial expectations), and market farms of their scale seem to average about a 40% margin, that means they’ll need to raise about $135,000 of vegetables – and that’s a lot more rutabagas than most of us got into farming thinking that we would be producing.
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