Get a Grip on Your Per Crop Profitability by Implementing Crop Costing 2019 National Direct Agricultural Marketing Summit October 7 – 9, 2019
What We Do We are a complete business incubator designed to nourish the talents of local enterprises and create opportunities for them to flourish. We are devoted to helping Chicago area entrepreneurs and growers improve their current processes so they can grow and prosper.
Focus today – how to improve your bottom line
• Some key questions Problem: • Do you know how much it costs to produce and sell How do you each crop? improve profitability • Is your pricing covering your costs per crop AND your ? overhead? • If you sell wholesale, are you still making money on a per crop basis? • What are your yields per crop? • Are you planting too much or too little? • Are you tracking what you sell? • Are you collecting sales tax? • What is the relative overhead of each crop you grow?
• How do you do that? Solution: • Financial planning (aka budgeting) is essential and Planning by depends on crop and • Historical information tracking • Solid record keeping results • Analysis • Required tools don’t have to be fancy or expensive • QuickBooks • Spreadsheets • Willingness to do it
• Budget at a different level Solution: • Traditional approach = planning at a farm level Plan by crop • Better approach = planning at a crop level and capture • Category breakdowns for Labor and Materials actuals by crop • Acreage allocated with anticipated number of plants produced and likely yield • Predict crop sales • Retail • Wholesale • Packaging options
• General Per Crop Information Solution: • Total Amount Planted Identify • Rows each crop as a part of the • Plants per row overall • Pounds per acre planting • Yield • Anticipated yield • Anticipated waste • Total available for sale • Acreage • Total acreage • Crop Allocation (as % of all crops planted) – determines overhead attributable to this crop
• Quantify the projected crop sales Solution: Identify each crop as a part of the overall planting
• Materials, allocating cost per category Solution: • Pots • Soil Identify the materials • Pre‐planting Heating needed for • Seeds/Starter Plants the crop • Fertilizers • Insecticides • Fungicides • Herbicides • Other
• Materials, allocating cost per category Solution: Solution: Identify the Identify the materials to materials be used for needed for the crop the crop
• Labor, including rate per category Solution: Solution: Solution: • Pre‐planting care Identify the labor Planning by Identify the • Laying Plastic crop and needed for labor to be • Planting tracking the crop used per results • Spraying crop • Hoeing • Cultivating • Harvesting • Washing/Packing • Other
• Labor, including rate per category Solution: Solution: Solution: Identify the Planning by Identify the labor crop and labor to be needed for tracking used per the crop results crop
• Anticipate type of sales Solution: • Retail options • Price per unit or pound Retail vs. • Price per package size Wholesale • Wholesale pricing
• Anticipate type of sales Solution: Retail vs. Wholesale
• Calculate profitability Solution: • Anticipated totals sales • Anticipated Cost of Goods Sales COGS • Overhead allocation for crop Overhead • Net Profit/(Loss) Allocation
• Calculate profitability Solution: Sales COGS Overhead Allocation
• Capture labor time accurately • Design something that is meaningful for you. Solution: • An example: Time Sheets
• Sub‐total Labor Solution: Sales COGS Overhead This is the sum of all projected labor costs per crop Allocation
• Sub‐total Materials Solution: This is the sum of all projected materials per crop Sales COGS Overhead Allocation
• Big Picture Solution: Summarize budgets for all crops
• Preparing your Budget Solution: • Total Revenues Key numbers for • Cost of Goods Sold your budget • Materials (categories have been summarized) are calculated • Labor in this • All other expenses spreadsheet • Enter them into QuickBooks
• Tracking Actuals at the CROP LEVEL Solution: • Make a copy of your Budget by Crop spreadsheet and call it “Actuals by Crop” Sales • Very Important: capture actuals at the crop level COGS Overhead • By season end, your “Actuals by Crop” will be the history to use for next year’s budget process Allocation
• Updating QuickBooks Solution: • Sales • Use something like Square to precisely record sales as Sales they occur COGS • Program square for all the package Overhead options you have • Don’t forget sales tax Allocation • Cost of Goods Sold • Materials and Labor • All other expenses
• Accuracy is important • Consistency is critical Solution: • Be meticulous Garbage In • Watch your expenses as they occur – Garbage Out • Don’t get behind in posting your financials
• How important is planning? Bottom Line: • “Planning is one of the key, most important elements to the success and survival of any business.” A calculated Steve LeFever, Business Resource Services, Inc. guess beats • Monitoring your financial position, on a regular basis, a SWAG* gives you the data you need to better understand and manage your business. • Looking at financial results after the fact is too late to * scientific affect change today. wild ass guess • Monitor where you are often during the season, comparing the actuals to budget, and adjust as needed.
Thank You
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