Are You Staying True to Your Goals?

Take time to set goals and revisit them.

Take time to set goals and revisit them.

Sam Smith, Farm Business Specialist at the Intervale Center in Burlington, VT

Just before Thanksgiving every year I get a flurry of calls from farmers ready to start the business planning process. They have brought in or sold their crops and are starting to think about next year. One of the first topics we cover when sitting down to start the planning process is farm and personal goals.

While planning is usually focused on the financial goals for the farm business, I also recommend developing or reviewing non-financial goals. Financial goals are very important, but I find that they sometimes overshadow other farm or personal goals. Farmers need money to stay in business, but the actions they take to meet their financial goals often take them farther away from their other goals.

An example of this would be a vegetable farmer who identifies the financial goal of growing her business to a larger scale to make more money. While that goal makes financial sense, she may end up managing a crew of farm workers and making sales calls instead of doing the field work she really want to be doing.

Having clarity around non-financial goals can help identify the desired future state, which can be aligned with financial goals. Chances are you got in to farming for a variety of reasons, but being clear in those reasons will help you from going down a path that takes you away from them.

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The Deodorant- Tractor Scale

Slide1

Michael Porter discusses two basic approaches a business can make its way in the world. The first is to be a high volume/low cost commodity provider; the second is to sell differentiated products, those with one or more attributes that help them stand out in the marketplace and hopefully garner a price premium. Economists sometimes refer to these as being price takers and price makers, respectively.

We see this clearly in agriculture. Many farmers, those who tend to operate on larger scales, produce milk, corn, wheat or other basic commodities which are pooled with those of other producers and sold. Little or not information of how, where or by whom it was grown travels along to end consumers. Indeed, these products are largely homogeneous and interchangeable. No one producer influences the price, they simply sell at the going rate. These producers do very little if any marketing; marketing is done by others, much farther down the supply chain. They gain only a small amount per unit sold and must sell a lot to make a living.

At the other end of the spectrum, many farmers create value by differentiating themselves, offering products with information on where, who and how: local, organic, free range, fair trade, etc. This information needs to be communicated somehow: by promotional material, labels, displays, newsletters, websites, social media, etc. They make money both on production and marketing, capturing both premiums and a larger share of the food dollar.

I made the graphic above as part of a presentation I am doing; I found it both amusing and hopefully instructive. A farmer may choose where they wish to be on that scale – their position in the market place in a sense – by what they like to do and do best. Are they good at/like selling, communicating, interacting  with people-implying a need to wear deodorant? Or are they good at and just want  to produce, drive the tractor and take care of plants and animals, and leave the marketing to a few phone calls if anything?

I must admit I stole this idea from Chris Fullerton, formerly of Tuscarora Organic Growers and PASA, from a talk many years back. Credit to him, and if anyone knows where he is, say hello and thanks.

Written by: David Conner
Department of Community Development and Applied Economics
University of Vermont

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Are You Collecting Sales Tax?

On September 21 the Times Argus printed an article called “Farmers, Vendors Face Back Sales Tax” It is important to understand that there are times when farms are exempt from sales tax and there are times when a farm is required to collect or pay sales taxes. This applies to the sale of farm products and in the case of the Time Argus article it applies to the purchase of equipment. Getting a bill or penalty to pay back taxes is not likely in your budget, so let’s avoid any surprises.

Farmers selling products direct to end users on-farm or at farmers markets must understand which exemptions do or don’t apply to them. Click this link to a fact sheet from NOFA VT, page 4 describes tax regulations related to farmers market sales.

http://nofavt.org/sites/default/files/Regulations%20for%20FM%20Vendors.pdf

Prepared Foods, Crafts (ie Wool), Beverages are generally taxable. In certain states, edible flowers are not taxable but cut flowers/ornamentals (dried corn/gourds) are taxable. Consult your state department of taxes to determine if any of your “non-food” products are taxable (lumber, christmas trees, nursery plants, dried flowers ?)

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Growing Places Early Registration Deadline

Growing Places for new and aspiring farmers!

Are you considering starting an agriculture or natural resource based business, but are unsure where to start. Growing Places is designed to help participants develop a comprehensive goal statement which will help in the business planning process, explore and evaluate opportunities and resources and develop familiarity with state and federal agriculture programs

Each class addresses a different aspect of business development and is taught by experts who will give depth to the discussion with hands-on exercises. Guest speakers share their experiences with the group to offer a real-life perspective. Visit Growing Places class information to learn more, or contact Heidi Krantz 802-223-2389 x 203 heidi.krantz.1@uvm.edu

Fall 2014 In Person Session

Dates: Thursday s, 5:30- 8:30 pm October 2, 9, 1 6 & 23 in Berlin, VT
Early registration: $1 1 0; Deadline: September 1 4, 201 4
Standard registration: $1 50; Deadline: September 25, 201 5.
Registrations received after S eptember 25 will be subject to a $50 late fee.
Winter 2015 Online Session

Dates: Jan 1 2- Feb 9, 201 4
Early registration: $1 1 0; Deadline: Dec. 1 , 201 4
Standard registration: $1 50; Deadline: Dec. 21 , 201 4.
Registrations received after Dec. 21 will be subject to a $50 late fee.

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Farm Insurance

New Picture-jpgThinking about farm insurance is often an easy topic to put to the side and try to remember to think about sometime next week. The main purpose of any insurance is to protection from a catastrophic financial loss.

Risk and insurance are pretty closely tied together. Insurance is one way to handle some of the different risks that we face. There are 5 different ways to handle risk.

  1. Control the risk. Wearing seatbelts is a way to control the risk of physical injury in a car crash.
  2. Avoid the risk. I am tempted to not grow sweet corn in my garden next year because of skunks and coons.
  3. Retain the risk. Even though there is a possibility of a chimney fire, I continue to burn wood, but I burn dry wood, clean the chimney each summer, and keep a fire extinguisher nearby.
  4. Transfer the risk. This is insurance, we pay them to handle our risk.
  5. Ignore the risk. Commonly done, but often not the best strategy.

After a loss, there may be several costs. The cost to replace the damaged property. The loss of use of the property which results in extra expense and lost income. There may be lawsuits from injured people. Then there could be medical bills, or even disability or death.

Farmowners insurance policies are a combination of several different kinds of insurance: personal, commercial, property, loss of use, income and extra expense, and liability. The cost of a policy depends on location, value of buildings, equipment- production and processing, size of operation, liability limits for injuries on the farm and product liability, and more.

Homeowners insurance policies do not cover selling products. Some companies offer ‘small farm’ policies that may provide the coverage that you need.

How much insurance do you need? Talking with an insurance agent can give you an idea of what risks your business faces. If you are selling food products to the public, you need to have some product liability insurance. Unless you have nothing to lose. Which slot machine do you play? $10? $5? $1? 25¢?

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