by Eric Soderholm, Organic Production Coordinator

Many of us take on the challenging task of organic farming because of our passion for the work and commitment to its importance, even if the hours are long and thankless and the pay is minimal. At the end of this year, I urge you to ask yourself some tough questions about the financially sustainability of your farming operation. As on any farm, there are likely some crops or enterprises that have an excellent return on your investment of labor and input requirements while others are a major money sinks that eat up valuable time and resources throughout the season. On a diversified farm, it can seem hopeless to try to sort out whether you are making money, breaking even or taking a loss on any one component or crop. With a little patience and the right tools, however, it is possible to comprehend your farm’s profitability and as a business person you deserve to know!

 

Analyzing and understanding your farm’s profitability, however, is nearly impossible to do without a good set of records that collect the data necessary to paint a full picture of the costs and income associated with each of your specific enterprises. More than just the occasional scribbles of large purchases or each week’s market sales on your calendar—take time to develop record sheets where you can efficiently record detailed, complete and relevant information that is easy to compile and interpret later.

 

Often neglected, but of particularly importance, is recording labor time/costs since this can be one of the heftiest expenses on organic farms, which rely more heavily on human power. There are so many costs that really ought to be included as you account for production costs: land use expenses like mortgage/rent and taxes; transportation costs to deliver your product; marketing expenses; equipment purchases, repair and depreciation; office supplies; utility use for irrigation, packing and cooling. Most of these are easy enough to pull together at the end of the year assuming you have a simple method for tracking receipts for each category.

 

A useful resource for vegetable growers to organize records and calculate farm profitability is a tool called Veggie Compass. A new 2014 version of this interactive multipage spreadsheet was recently developed by the University of Wisconsin Madison and the Southern Sustainable Agriculture Working Group (SSAWG). The tool is completely free and available online to anyone interested in using it. Click on the following link to download the 2014 Veggie Compass Whole Farm Profit Management System Spreadsheet as well as labor data and sales record templates.

 

The spreadsheet require some familiarity with Excel, but a primer for those new to Excel will get you up to speed. Detailed instructions are provided to help navigate your use of the tool. You enter values for your farms expenses and income in the first three pages of the spreadsheet and these values are used to provide profitability information for each specific crop in your various markets. Veggie compass, again, will only be as useful as the data that you provide. A good first step would be to become familiar with the tool, see what values you are already currently tracking (through personal records, check book, Quickbooks, etc…) and which you will need to begin tracking.

 

Burnout is an unfortunate reality for many hard-working, well-intentioned sustainable farmers. Profit margins are already thin and production challenges potentially overwhelming. I cannot overemphasize how important I believe it is to assess farm profitability and to take the time needed to accurately estimate your profit and loss. Thus, annual adjustments can be made to the crops, production practices, labor arrangements and marketing venues that are a financial drain on your operation and not worth continuing. Although tracking profitability is an important tool, keep in mind that monetary gain should most certainly NOT be the only factor to consider when making decisions concerning your farm’s production. You may have strong preferences that guide your choice of some production techniques or grow certain crops because you enjoy working with them –even if they aren’t huge money-makers. It is helpful to be aware of and appreciate these lower-profit components while balancing them with other high-return enterprises to sustain your financial needs.

 

> For a full report on other available Record-keeping software and templates, check out CFSA’s new Record-keeping Report in the For Growers Toolbox!