Advanced Crop Planning For Profit (Part 1)
Advanced Crop Planning For Flower Farmers
I hate to admit this but, when I first started my farm business (at the time it was really more of a garden) I sucked at this whole crop planning thing.
When I say “whole crop planning thing,” I don’t mean a basic garden plan where you just pick what varieties you want to grow and count backwards from your last frost date. I am talking about ADVANCED crop planning for real, legitimate farming businesses.
As I tried to make the jump from basic garden planning to advanced crop planning, I thought it would be so easy. Just pick out what flowers I’m going to grow, and decide when to start the seeds: simple enough, right?
Spoiler alert: It wasn’t. (And isn’t.)
Once you know and are comfortable with the very basics of garden planning, having the knowledge to go one step beyond to “advanced crop planning” can make or break your business.
At first, I spent weeks and weeks pulling my hair out trying to get every detail right, and trying not to forget things. I often forgot about flower crops or messed up planting dates, and didn’t account for finances in any part of it (I learned the hard way). It was so overwhelming, frustrating, and downright stressful.
My husband surely thought I was a lunatic as he walked into my makeshift office (our spare bedroom), and saw the floor littered (ok, COVERED) with sheets of paper with scribbled mis-matched maps and rough hand-drawn spreadsheets with random “days to maturity” I found on various seed websites. There were color-coded sticky notes and highlighters stuck all-over the place, the meaning of each color long forgotten since the beginning of my quest.
When I exclaimed my frustration and overwhelm by saying “There HAS to be an easier way to do this!", He would simply ask me “Jenny… how do you eat an elephant?” with that weird fatherly knowing look in his eye. I would hang my head and begrudgingly mutter back “one bite at a time.”, then unwilfully return to my pity-party and planning saga.
I am happy to announce that after several years of floundering around in excel spreadsheets and reading a bunch of vegetable-growing books, I FINALLY figured out a step-by-step solution to my future-predicting, crop planning woes!
I wanted to share my process in hopes that it will help you scale up your business more easily (and to save you as many headaches as I had).
Advanced crop planning is essential if you want a successful and profitable farm. Without one, you are working without any aims, goals, targets or direction. Simply choosing what flowers you want to grow and deciding when to start the seeds is NOT a solid plan to achieve your business and financial goals. The advanced crop planning process will force you to get clear on how much money you want to make, from what, and a concrete plan on how to make it happen.
On a farm it’s rare than anything goes exactly to plan, but you have to have one anyways. Things may go wrong, or need to be shifted around due to unexpected issues or weather, but you will have a guiding principle to help lead you through any tough spots. The old Ben Franklin adage rings true in this situation:
“If you fail to plan, you are planning to fail.”
This “Advanced Crop Planning” series is specifically meant for flower farmers who are already comfortable with basic crop planning. It will be most useful to those who already have a good handle on figuring out how many plants you can fit in a bed based on spacing, knowing basic greenhouse production of flowers, and has experience growing cool season and warm season flowers. You should know basic spacing and environmental requirements of flowers.
Advanced crop planning is NOT just “counting backwards from your last frost date” and squeezing varieties haphazardly into your space. That is not a thought-out plan to succeed in business- it is a basic gardening plan.
In this blog series I will be giving a very basic outline of my process. I get VERY detailed in my crop planning process and am currently developing a class on how to show you how to do this as well. A detailed crop plan will determine exactly what your projected gross revenue and profits from each crop and sales outlet are, how to create your budget, and a detailed greenhouse & field plan. It’s honestly FAR too detailed and way too much information to put into a blog post, so if you are interested in diving deeper, keep an eye out for the class announcement.
The flower crop planning process is actually fairly straight forward, although it CAN be a lot of information to cough up at once. So heed my warning to you: do not let yourself get overwhelmed. Take it one step at a time, and don’t skip ahead. Take your time and lots of deep breaths and remember to HAVE FUN with this. Remember the mighty wisdom passed on from my husband: “How do you eat an elephant?” Say it with me:
"ONE BITE AT A TIME.”
Confession: I am an obsessive harry potter fan. Not ashamed to admit it. So for those of you that are with me on that, one way to make this way more enjoyable is to pretend you are a much cooler version of Sybill Trelawney. Get excited to sit down, stare into your crystal ball and have fun predicting the future. Do this not with the reluctance that Harry & Ron would, but with the gusto that Sybill had - only, be sure to focus on the positive stuff and not just the death of your students (or in this case, flowers).
In the case you are not a raving harry potter fan… forget about that stuff I just said and remember to have fun with your projections.
Before we get into the nitty-gritty, please understand that you can make this process as in-depth or as simple as you’d like it to be. You do not have to follow what I do here step-by-step, you can just use it as a guide to tailor it to your own farm business needs. But following this plan step-by-step will certainly aid you in business success. The examples I use here are simplified a bit for the ease of understanding & getting started with the process. Once you’ve completed a basic crop plan and gotten through a season or two of growing, it’s wise to dive deeper into the process with more detailed projections and spreadsheets (as mentioned before, I am developing a class on this topic now).
I suggest using excel spreadsheets for this process, but it’s not necessary if you’re more of a “pen and paper” person.
LETS DIVE IN.
This blog (part 1) is the first in a 4 part crop-planning blog series. Each part will outline a step (or two) in the crop planning process. And no, it won’t entail you trashing your office (spare room) with endless sheets of paper. Here’s how it will go:
· Part 1: Financial Projections
· Part 2: Sales Projections & Marketing Chart
· Part 3: Production Plan & Field Map
· Part 4: Greenhouse Plan and In-Season Considerations
CROP PLANNING STEP 1: FINANCIAL GOALS
HOLISTIC FINANCIAL MANAGMENT
As I mentioned before, I will be using simplified versions in these examples so you can get started on the right foot. You can do more research into holistic financial management on your own, but the basic premises will be outlined here. We will start the entire crop planning process with planning for your profit and setting your financial goals. The basic equation we are working off of is:
PROFIT = INCOME - EXPENSES
Start by planning the income (gross/total sales) you’d like to earn this year, then plan the profit (retained earnings/salary), and finally your expenses (costs).
INCOME:
Choose a realistic number for your projected total income(revenue)- it should be based on your capacity for production on your specific acreage and access to help. If you are brand new to farming as a business (hopefully if you’re reading this you have at least a few seasons of experience), shoot for a lower number at first (maybe between $2,000-$10,000). If you have a few seasons under your belt, you’ll have a better idea of what you can earn in one season from your piece of land.
PROFIT:
To plan your profit, you should have a rough idea of the profit margin you are operating off of. Some profitable farms spend 75% of their gross sales on expenses, and some spend only 25%. This number will be unique to the type of farm you have, the size of the farm you have, the help you hire, and many other factors. As you get more experienced in your business, you will get a better idea of what you should be aiming for. A good start for a brand new farmer (on 1 acre or less) is to shoot for a 30%-50% profit margin. (If it helps: at growing on just over one acre with some hired help, and 6 years experience, I currently earn between a 40-50% profit margin.)
Your profit will be what you will use for your living and personal expenses AND any capital expenditures (farm improvements such as new buildings, infrastructure, hoop-houses, equipment, tractors, etc.). For the first few years of your business you likely will put any and all profit right back into the farm in the form of farm improvements in order to grow your business to a place where you can afford to pay yourself a salary.
EXPENSES:
Subtract your profit from your farm income. What remains is what you have available to cover this seasons expenses. Create a budget for all expense categories including land/mortgage, labor, insurances, buildings/infrastructure, utilities, fertilizer, seed, subscriptions, marketing fees, your website, supplies, vehicle, fuel, etc. Be realistic in your budgeting & allocations - do some research & number-crunching to get a better idea of what supplies and insurance costs.
FOR EXAMPLE:
If you want to profit $30,000 this season, and you are pretty sure you can operate at a 50% profit margin, your equation will look like this:
PROFIT ($30,000) = INCOME ($60,000) - EXPENSES ($30,000)
A note for brand-spanking new farmers: If you simply have NO CLUE where to start with the above steps (which is totally OK!), start with this simplified version instead:
Pick a profit goal (choose a realistic number - if it’s your first 1-2 years pick a number between $2,000-$10,000).
Double your profit goal: this number is your gross sales (income) target.
Finally, plan your expenses using the other half of your gross sales and allocate it to your different expenses.
For example, if you want to profit $1,000 your first year: your income target would be $2,000. You’ll use the half of the $2,000 for your profit ($1000), and allocate the remaining half to your expenses ($1000).
PROFIT ($1,000) = INCOME ($2,000) - EXPENSES ($1,000)
Great job, you are doing awesome so far! You are well-versed in all kinds of business & finance jargon now! :)
Financial Projections
Now, if you achieve $2,000 in total sales this year on your farm, at a 50% profit margin (meaning you spent $1,000) so you earn $1,000 in profit - that’s great! You’ve hit your goal! It’s a wonderful start, but not exactly enough to kick your off-farm job (if that is your eventual goal - totally cool if it’s not, though).
I have found it super helpful to make a series of profit goals over the next 5 year period. As your farm becomes more efficient though learning lean growing practices and through better financial analysis (hey there, my good ole’ friend Mr. Enterprise Budget!), more profit can likely be squeezed from gross sales.
Projecting overall sales and margins is definitely tough, and not an exact science, but remember when I told you to embody Sybill Trelawney, the divination (fortune-telling) master? Good- keep on those positive (and realistic) witchy vibes.
In all likelihood, your farm will make gradual increases in gross sales each year. If your goal is to eventually pay yourself $45,000 from your farm, you will most likely need to earn at least $100,000 in gross sales. Map out a plan for the next 5 years to work towards your goal, starting with your gross sales and net profit for this year, then the following year, and the next 3-4 years afterwards.
WHOO HOO! You’ve just completed a MAJOR piece of the crop planning process!
It wasn’t so hard, now, was it? You totally just made this financial projection your B*tch- what a badass you are!
Now, go joyously into your notebook or excel spreadsheet and start projecting your financials in a way that would make both Sybill Trelawney and me proud! Let me know what kind of progress you made. Don’t forget to get EXCITED to think about all the possibilities for you & your farm!
Check back on the blog next week for Part 2: SALES PROJECTIONS AND MARKETING CHART, where we will dig into the specifics of projecting sales from each of your outlets and how much of each flower you will grow based on those projections.
One last thing - if you found this useful, insightful, or inspiring, please share this with a flower pal or on your flower grower facebook page! I have been spending hours and hours writing tons of information to be published here FOR FREE. I want as many farmers to succeed on their farm as possible, and I think that this will help a lot of folks out. Thank you for sharing this with your friends right now, I appreciate your efforts to spread the knowledge!
SEE YOU NEXT TIME! :)