Profits are often thought of as being what is left over once the expenses have been deducted from the sales.
But, what if there were another way?
What if you could decide how much you wanted to get paid this year?
Well… you can.
In fact, the act of deciding how much profit you would LOVE to make this year is the critical first step in running a profitable farm business.
The more our intentions are clear and well defined with ourselves and the ‘universe’, the more we are able to manifest our goals and vision with ease.
What we’re doing here is rearranging the way we think of the profit formula:
From Income-Expenses= Profits… to Income-Profits=Expenses.
So, what’s it for you? How much money would you love to make this year?
Now, I’m not talking about some pie in the sky/ pipe dream number.
Pick a number that is attainable AND is somewhat of a stretch….something slightly outside your comfort zone… A number that, if you reached it, would cause to to celebrate and bust out the champagne (actual or metaphorical). I suggest somewhere between 10-25K $ per full time farmer (or even up to the 50K $ range if you are further along on the profitability journey.)
Great ! Now look at what gross income you can realistically expect to sell this year… somewhere between 10-25% more than last year.
Now, let’s take a look back at our rearranged version of the profit formula:
Income-Profits=Expenses
We anticipate what we can sell. We decide how much profit we want. We then have a clear picture of what our spending budget is for the year and we go about deciding how that budget will be spent.
Make no mistake… our expenses are way more flexible than we generally realise. Being passionate about farming, it is all too easy to spend way more than needed. Especially given that all too often we have no idea how much we have spent so far this year versus what we were planning on,
So plan it out! Both by expense type and by month. (Breath) I find it to be very useful to add a safety margin to this cash-flow projection equivalent to 5-10% of planned expenses.
Super! So you have a plan… now what?
Monitoring cumulative income and expenses EVERY MONTH is the key to results!
We can’t manage what we don’t measure.
Yes.. This means keeping your books up to date.
But the more important step is to compare where you are at currently with where you had planned to be…. and take actions to correct any deviations. This often means being creative or frugal with what we purchase when we see that a certain expense category is getting ahead of itself. Yes, it’s cheaper per screw to buy the box of 1000 screws… but if your hardware budget is running low, you’re better off with the box of 100 screws if that’ll get you through the year.
Alternately, this can mean exploring new marketing avenues or putting more energy into existing ones… though the control of expenses is what is more often overlooked in my experience.
So there you have it. This process does take some effort up from to get it all set up and running, but I promise you the results will surprise you. Personally, this method not only boosted my net income up past 70K$ per year (as sole manger of the farm, working 40-55 hours per week, with 5-6 employee) but it also greatly reduced my anxiety around money and took the guesswork out of operating the business.
Go make a ruckus!