End of Summer Business Review: Are You Using SMART Goals?

Listening to the crickets and watching the meteor showers reminds me that summer is winding down. It also is a trigger to dig out the business plan and take a look at where I am as the end of the “third quarter” approaches. Why not grab your business plan and join me to reflect on the business goals we wrote for the year – goals that are SMART:

Weather Vane with Dollar SignSpecific, Measurable, Achievable, Relevant and Timely.

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What does the 2012 Census of Agriculture have to do with me?

It’s no secret that farming can be an isolating and difficult vocation at certain times. A farmer’s typical daily duties might include keeping up with the weeds, caring for sick animals, moving chickens, fulfilling wholesale orders, rushing to the farmers’ market, and responding to e-mails and phone calls. My partner is a poultry farmer and processor, I work to support beginning farmers, and both of us feel like we cannot seem to keep up with the vast amounts of farming information we receive every day on topics as diverse as best management practices, marketing strategies, new loans available, etc. With the release of the 2012 USDA Census of Agriculture, organizations have been going crazy gleaning trends from the data and trying to understand what it means for farmers and for people whose work supports farmers, like mine. I recently discovered one resource that I’d particularly recommend if you are a data geek like me and you need a bit of a break from the day-to-day details of farm life. It is also important as a business owner, or aspiring business owner, to understand the trends happening in your work sector. Whether you are writing the marketing section of a business plan and need to outline the competition and marketplace that already exists, or you are thinking about your current businesses potential for growth in New England, this data can be helpful. Sometimes this information can be daunting to track down and summarize, but this particular resource, the Vermont Food System Atlas, does it all for you!

The Farm to Plate Network, an initiative of the Vermont Sustainable Jobs Fund, is developing a 10-year strategic plan to strengthen Vermont’s food system, with goals such as increasing profitability of farms, increasing consumption of Vermont-produced food, and increasing production and sales of local food for all markets. Their Vermont Food System Atlas is a website developed by the Farm to Plate Network to aggregate information relating to the food system in Vermont. The Atlas website outlines the strategic plan, lists job postings, news and announcements, events, as well as a lot of other information related to the food and farming sector in Vermont. Farm to Plate experts have taken the historical and updated 2012 census data and connected it with those goals. I am not going to explain all of their conclusions, but instead will list a few of my favorite facts and provide links to some of the charts and data that I find most interesting. When you get to a page, check out the arrows on each side of the charts to scroll through various graphs related to the goal.

  • Direct sales of food in Vermont have increased from $9,713,042 in 1997 to $27,430,000 in 2012. This is a 98.6% increase. Although direct sales of food are not necessarily local, according to Farm to Plate, direct sale statistics provide helpful proxy indicators of consumption of local food products. http://www.vtfoodatlas.com/getting-to-2020/1-total-local-consumption
  • To put it in context, direct sales are still only a small % of total food sales. They account for 3.5% http://www.vtfoodatlas.com/getting-to-2020/1-total-local-consumption
  • According to 2012 data, about 15% of all Vermont farmland is protected by an easement.
  • In 2013, 3,710 acres of farmland were conserved, down from 2012’s 4,460 acres that were conserved.  http://www.vtfoodatlas.com/getting-to-2020/5-land-in-agriculture
  • New England accounts for .72% or $2.8 billion of all agricultural products sold in this country. http://www.vtfoodatlas.com/getting-to-2020/7-food-production
  • The total value of all agricultural sales in Vermont were $776 million, up from $746 million in 2007. http://www.vtfoodatlas.com/getting-to-2020/7-food-production
  • Maine and Vermont were the only states to see increases in agricultural sales.
  • Milk from cows accounts for about 65% of the total agricultural sales in Vermont, leaving about $267 million for all other sectors.
  • The number of farms in Vermont has increased 5% since 2007 and 26% since 1997.
  • The number of dairy farms in Vermont has decreased about 49% since 1997.
  • In 1997 there were 159 vegetable farms, 351 in 2012, and 252 in 2007.
  • In Vermont, 15.1% of farms accounted for 90.5% of agricultural sales.
  • There are 1,760 farms in Vermont that make less than $1000 in sales.
  • Farms making between $1,000 and $2,499 in sales account for less than 1% of total sales but 11.4% of farms.

 

Try to think about what this means for your farm and for the Vermont food system as a whole? If 15.1% of farms make 90.5% of agricultural sales what does that say? If 11.4% of farms split less then 1% of sales, what does that mean for those farmers?

If you want to scroll through all the goals and the associated data, visit www.vtfoodatlas.com and hit “Get Connected: Click Here” in the upper right hand corner, and then choose “Food System Data” on the left hand side of the screen. This will bring you to an overall summary of the findings; if  you click one of the live links for the goals, you will get connected to specific charts related to that goal.

 

 

Posted in Facts & Figures, Farm labor and human resources, Financial Mgmt, Land access, Marketing, production information, Resources for Beginning Farmers, Scaling up, The USDA Farm Bill

Check Margins Before Scaling Up

Farms start off at a small scale for many reasons but many owners realize they want or need to expand. Expansion  most often presents the potential to increase from a part time income to earning a full time income from the farm. Before you decide to expand you’ll want to check your “operating margin”. Here is a basic technique to evaluate your operating margin (there are often many ways to do these calculations but let’s keep it simple). Use this cash flow statement here.

  • Add up all your income for the previous year
  • Subtract variable expenses and fixed expenses. These are the costs for materials, supplies and services used in the previous year. Don’t include capital activity (purchase of long term equipment, buildings or land with cash or loan payments)
  • How much money is left? (on the cash flow link below this is the line that says “receipts minus expenses at the bottom of page 1).

If you show a positive number at this point you can consider expansion and evaluate your ability to invest in business assets (capital activity) or draw out more income as the owner (this is page 2 on the cash flow).

If you calculate a negative number STOP! Expansion could make the financial situation worse. An extra 5 ewes held over from last years lambs or an extra .5 acre of vegetables might not help. Think about strategies to get your costs more in line with the income you generate. Expansion might resolve the problem but it is not a guarantee.

Download this simple cash flow PDF and complete it to the bottom of page 1. The line “receipts minus expenses” will indicate your operating margin and assist in decision making moving forward.

 

Posted in Financial Mgmt, Goals, Scaling up | 2 Comments

Ireland – Recent Entrants Training

Last week I had the pleasure of bringing 3 colleagues from Ireland’s extension service around Vermont. I studied last year with James, Fintan and Kevin, financial management specialists, when I was on sabbatical study leave in Ireland.

James McDonnell and Kevin Connolly, Teagasc; learn about maple at Mary McCuaig's, S.Woodstock, VT.

James McDonnell and Kevin Connolly, Teagasc; learn about sugaring from Mary McCuaig, S.Woodstock, VT.

Not surprisingly, farm financial training was one of our topics of conversation. They told me about a 3 half-day training program, ‘Cash Plan 2014.’ It is specifically for farmers who started up since the beginning of 2008 (recent entrants), dairy farmers in particular. Teagasc (an organization similar to Land Grant colleges in the US) will begin offering this course in the fall of 2014, they have 900 farmers signed up for it now.

Farmers who successfully complete the program will receive up to €1,000 (about $1,300)! The course is ‘hands-on’ with spreadsheets to be used for farm financial recording on a monthly basis for 2014, and preparing a monthly budget for 2015. The third piece of the course is to complete a workbook, My Farm, My Plan (Teagasc) that guides a farmer through the thought process of writing a business plan.

The European Union’s Dairy Marketing Quota ends in the spring of 2015. The Irish government wants more milk (for the cash that it creates), dairy farming is one of the most profitable sectors of the ag economy there, and many dairy farmers are planning expansions. The goal of ‘Cash Plan 2014’ is to teach the use of financial tools, and to get farmers thinking about a plan for their expansion.

The Vermont New Farmer Project has a 3 half-day course in February, Intro to Ag Financial Management (alas-with no big grant money to encourage people to attend). Our plan, as of July 2014, is to offer it in Feb, 2015 in Rutland and Berlin. The course focuses on the 3 basic financial statements: Balance Sheet, Cash Flow, and Income Statement, and how you can use them to manage your farm.

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Ten Thoughts about Employees

Editor’s Note: This week’s post is from guest blogger Chris Blanchard, an organic farmer and farm consultant based in Iowa. Through Flying Rutabaga Works, Chris offers consulting to organic and small-scale farmers on effectiveness and productivity, marketing, business planning and development, post-harvest handling, food safety, greenhouse crop production, and more. 

  1. Happy employees are productive employees – and productive employees are happy employees.
  2. The right tools plus the right people equals maximum productivity.
  3. The boss sets the tone and sets an example.
  4. The boss is never tired. Even if she is.
  5. Be certain going in that what you say you want is what you really want. If you have a partner, discuss this with them.
  6. Some people are fast. Some are not. You probably can’t do much to make dramatic changes, so figure it out before you hire. After you hire, either find a way to deal with what you’ve got, or change what you’ve got. Only two choices.
  7. Be clear about goals and be clear about standards- and make those standards quantifiable. 50 bunches per hour. No more than 3 cercospora leaf spots on a Swiss chard leaf.
  8. Be certain. Don’t tell people to “do their best”… describe best. Don’t make a big deal about changes in procedures- it makes even good employees think they know as much as you.
  9. Poor performance by one employee drags management and labor down.
  10. If you have a partner, be certain you agree on goals and procedures. Anything else encourages dissent and confusion.

Learn more about Chris and check out his blog at Flying Rutabaga Works website.

Posted in Farm labor and human resources, Leadership, production information, Quality of Life, Resources for Beginning Farmers, Scaling up