Roadmap to profitability helps farmers find the hole in their pocket
McPHERSON, KS - Richard Wiswall likes numbers. In that he might be an anomaly among farmers, at least where the numbers are concerned. Some of his numbers involve planting rates and seed inventory, tractor hours, and labor costs-categories most farmers are familiar with-but he takes things a step further-okay, many steps further-by calculating, and tracking, almost every facet of his family farm in East Montpelier, Vt. He tallies numbers to an extensive degree; for instance, his greenhouse operation, is broken down by the cost of each flat, the amount of soil per flat, the number of flats filled in an hour, the labor cost to fill each flat in an hour, and so on.
While to an outsider it might seem like an excessive amount of work, there's a reason for his method that has been borne out over three decades of farming.
"You have no idea what part of the farm is making money and what part is losing money," he said. "I can guarantee they aren't all going to be the same."
Wiswall, author of The Organic Farmer's Business Handbook, spoke of the "neglected side of farming," or the business aspect, at a special full-day workshop entitled "Farming Smarter, Not Harder: Planning for Profit" held Saturday, Feb. 22 at Pachamama's Alton Ballroom in downtown Lawrence. The event was sponsored by Kansas Farmers Union, Frontier Farm Credit, and Kansas Beginning Farmers Coalition.
When he first started crunching numbers, he had no historic reference with which to compare the numbers. He had a good yield that year and his numbers looked good on paper, but he didn't know how profitable, say, the quarter acre of carrots had been. Sure, it had made money, but how much? How did they compare to the potatoes, or the kale, or the spinach? He had no idea.
The answers lay in creating databases for what he called his crop journal. It was a fairly straightforward procedure that only required upfront expenditures of time before becoming second nature. Now, he says, he has real figures for how much money, labor and supplies went into each crop, which, in turn, is broken down into net profit and total expenditures.
"I needed more than one budget to compare enterprises to each other," he said. "You need to know individual sales for each crop or animal and expenses for each crop or animal. This is standard business practice. It's bulletproof."
Though it might seem daunting, the hardest part is just getting started, he said.
"Generally, start with your top sellers and list everything out," he said. "You have to put them on paper. Frame the big picture-the big numbers that are going to have the most effect-take it through to the end and then go back and tweak it. I'm not objective. I look at numbers and base my decision on those numbers."
By comparing enterprises or products, he was able to see which were most profitable. When he compared broccoli to kale, the differences were staggering. "Kale is a cash cow," he said. "Everything else on the farm paled in comparison. I used to not like kale, but now I love it. With every enterprise of your farm, you need to know which ones are the kale and which ones are the broccoli, and then saturate those markets when you can."
What seemed inconsequential-and a lot of work, translated into tremendous profit once the math was done, he said. Before developing the crop journal, he had no reference point for profitability. "I had a hole in my pocket," he said, "I just don't know which one."
Wiswall suggests that beginners take a couple of four-hour sessions to figure out their farms. This should be done in the daytime, not late at night when they're tired, and it should be done without outside distractions.
"Plan your markets, plan your crops, decide how to grow those crops, and analyze the top five sellers," he said. "After that it's just a matter of keeping track of things. You're going to look for the numbers you don't have."
Once the numbers are penned in, a workable budget can be constructed. Budgets should be kept simple at first, he advised, and with an established rate for labor. "Labor is a big budget item," he said. "But if you don't put something in for your labor, you're working for free."
Activities should be listed in chronological order, and the easy numbers should be inserted first. Overhead costs, what Wiswall called "the ball and chain" of business, can be included later once a draft has been completed.
The figures, when complete, will be a roadmap to profitability. "When you bring it down to smaller pieces, it shows you where your money is going to come from," he said. "It's a simplified marketing chart, and equally applicable to animal farming or vegetable farming. The spreadsheet tells a lot about your business and how it changes from year to year."
Planning for profit is a simple equation, he said: profit equals income minus expenses. By creating a detailed overview of the farm and all of its various facets, farmers can find the pocket with the hole and sew it shut.
"If you want to make money farming, there's nothing holding you back," Wiswall said. "You just have to do your homework."
And, of course, the numbers.
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