so on this channel we talk about uh stuff that's really important about growing about farming and
you know we've talked in the past about mental health I think that's one topic that is really
important regards to small-scale farming uh you know we often talk about how to grow stuff which
in my opinion is really really really important learning how to grow your crops really well but
there's one other aspect where we rarely talk about and I think that's really important it's
Farm economics what are the right numbers to make the farm work financially and and that's a topic
where there's a lot of gray area there's a lot of you know there's a lot of different
uh circumstances and there's a lot of different contexts so it's really hard to say exactly what
the right numbers are you know each Farm will be different but I know from having done this
so many years and having helped so many uh Farmers start up and set up their Farms some of the ratios
some of the guiding principles that you kind of need to have in your mindset so that you'll get
there someday so it all starts with that knowing the right ratios so in the past like I was you
know I was one of the first one you know in 2007 when you know I was excited about that to talk
about uh revenues per acreage you know at that time we were talking about a hundred thousand
dollars per acre and you know in that time that was big news and that was that's kind of the first
uh guiding point ratio that that came out and then you know there was there's people before
that they were talking about that but the the total amount of sales per acre in my opinion
is a really important Guiding Light okay that kind of steers the farm into the principles that you'll
follow with regards to having a tractor or not uh you know bio intensive spacings uh Greenhouse
the specs of the farm are clearly understood when you have that Revenue per acre and in my opinion
the revenue per acre today should be 150 and we talked about this in the past 150k per acre is
kind of the where you want to go it could be more and there's a lot of growers in the past that have
exploded that number good for them that's great they they're my they might be amazing Growers or
they might have amazing markets where the prices for what they grow is double that of others and so
that's great but 150k per acre I think today still is a good Benchmark to kind of go with
but you know we we can we can go further than that and we can we can go and talk about yeah
but that's great but what's the bottom line and the bottom line that we should be working with
is uh the ratio of one-third one-third one-third that in my opinion is the right ratio and the
ratio is one third of that Revenue per acre and if you're on two acres you multiply by two if you're
on 1.5 you get it is one-third is labor labor is one-third of the operating cost of the farm so if
you have one two three people it should add up to about a third of the revenue generated on the farm
the other third is cost of operation seeds compost you know bags you know fuel mortgage
and or depreciation on some of the things that you've bought it's it's always better
to get Finance for what you want to do and to spread out the expense over five years we can
talk about that later but that's that's a strategy that is really Cornerstone if you
want to be able to get to hit your ratios okay so one-third is labor one-third is cost of operation
and the other third is your profit is your revenue is what you make as the grower
and if that ratio is in your mind and that's what you're aiming to do you'll probably get there if
you're not aware of all of that if you're not thinking about these things you might never get
there it's like having a Target is like the first step into getting somewhere it's like having a map
and these ratios they're not too aggressive they're realistic and they will secure
uh firm sustained economic uh profit for the farm for many many many years and so then from there
it's it's really up to anyone to see if they want to grow the farm if they want to keep it like that
but these ratios are gold and you should remember them there's a lot of talk today about soil
ecology about no-till about you know all these aspects of farming people are geeking out totally
about that and that's great but remember the bottom line of a small organic Diversified Farm
is how much money you'll make at the end of the year that's really important because otherwise
your operation might be neat it might be great on YouTube it might be whatever but it needs to work
out financially and you need to have the the economic literacy to understand your farm as
you know as a business because that's what it is it's a business and in small scale farming there's
obviously not room for scaling up and having you know a growth that's exponential that's not
the goal but just making sure that you're making enough to sustain yourself to sustain your family
and to have a small profitable durable business I think that should be the dream of everyone
that should be like their number one aspirations and we should be talking more about numbers and
I don't think it's to go out there and kind of compare your farm with others and then throwing
the numbers and saying yes I I'm better than you because again coming back to context some
people have great markets some people have not so great markets some people are great Growers some
others are average Growers it balances out but I think these ratios are helpful I think they help
they help understand uh you know where you can go like on our farm that's where we're at like it's
it's about three you know we're on an acre and a half we're at 300 acres 300 000 per acres and
if you split that ratios that's pretty much our cost of operation and our net profit and for some
people that look at that from the outside they're like well that's that's not that much profit
but you know consider the fact that you know the mortgage for the farm where we live is inside
one of the the third of a ratio you know the car or the truck the fuel that there's a lot
of expenditures that are around our lifestyle that goes into the operating cost of the farm
and and I rarely talk about that because that's kind of like a it's kind of I don't want to get
into trouble but there's a large part of a revenue that is also Cash Money a little cash
money still today's is part of it and that that's worth a lot it's you know it's worth probably
a third more so in the end it works out it works out to have the payments paid on you know anything
that was financed tools greenhouses uh you know the mortgage on the farm it allows us to pay the
employees not that great of a salary and that's definitely one topic that we could be discussing
you know because I've heard it so many times obviously the people working on the farm they're
probably paid minimum wage a bit more but you know we hire them they come on the farm they
get a super nice training every time that they leave the farm every almost everyone that's been
to our farm at least man they're sad that they're leaving because they had a great time and you know
they made money because they're not spending any when they're with us so I'm I'm pretty
aware that our economic model wouldn't work if we needed to pay really good salaries to everyone
but yeah that's life you know a lot of the businesses out there they can if they can
pay great salaries for people good for them I don't know what they're doing but you know we're
growing veggies for the community and uh we're working really hard to get there and you know our
economics don't allow us to pay people 25 an hour it's just it doesn't work the numbers don't work
to all the young Farmers out there that are hesitant to borrow money to start their Farm
that really want to do it all on their own DIY I think your heart and your courage is recommendable
but if you work the numbers out you'll clearly see that it's much better to borrow money for
what you need and then pay it back over the next five years even though even if you pay if you
borrow a hundred thousand dollars and you have a 10 interest rate which is you know really not good
and the payback is over 10 years or five years even it's worth it because
the capital that you'll invest acquiring tools getting a greenhouse you know establishing
a nice walking pack washing pack area all of that is going to generate income
it's going to save you time it's going to make you more productive
and that's that's the money working for you and it out uh it out competes the interest rate
so I believe in borrowing money for the business and I also believe that you need to set up the
Farms so that at year five you're you're you're really making you're you're at the end you know
the farm design should be done so that at year five that's that's the farm and you start with
the dot plan where will that farm be in year five then then you get the equipment and you set up the
infrastructure perhaps over two or three years but you have the end planned in mind and that's
really important because that's going to avoid you you know getting a too small of a cold room
the first few years because you you didn't think that you would get somewhere else but you will and
the ratios that we talk about it's at year five that they should get there not at year one not at
year two year one if you don't lose money that's great year two if you break even that's great year
three you should be making a profit year four you should be making more year five you should
be heading hitting these ratios but you know doing it all on yourself taking all your cash money to
buy everything it's not good economic insights you should keep some of your cash borrow some of
it have a clear precise picture of the farm that you're building and you should have the ratios
that we talked about in your mind these should be somewhat your goals and also you should have
you know proper uh you should have proper budgeting you should keep register you should
register your sales you should know where you're at on a weekly or on a monthly basis you should
have sales and revenues in check all the time you should have someone of a clear picture of
your your financial as you're farming otherwise it's just you know I've seen it so many times
Growers that are dedicated they're farming full-on you know they're putting everything
they have in on the farm they go to market they load up in the morning they sell out
it's happening they're always on a rush things are booming so they're buying they're purchasing
they're not thinking about what they're doing with with with the credit card uh but things
are going well until you know November when they look at the bank account and after the
end of the season there's no money in the bank account and that doesn't mean that the farm
isn't profitable that means it's not run profitably it's not the numbers need to be
checked and you should have somewhat of some some guidelines of expense and revenues some
targets profits and loss should be kind of in your mind not not every day perhaps not every
week but at least every month you should look at where you're at with your numbers
and if you want to you know if you want to learn more about that and I think you should because
again coming back to my point it's really exciting to geek out about cultivation tool
it's really exciting to geek out on soil ecology getting a microscope to check out the microbes in
your soil that's all great but that's not gonna get you nowhere if you're not doing the math
and if your farm is not run you know with certain economic Acumen and so there's resources out there
uh the farmer's office is a book that I like that I would recommend you can check that out and you
can check some uh you can check this video that we made on Farm profitability that's it for this
week I hope you guys are well I'm well things are growing I'll see you next time Jay I'm out