Start With The Money

Are you wondering where to start planning for this yearís market garden?

Over the next few days, Iím going to break down one way to plan your growing season.

Unfortunately it doesnít start with that seed catalog you just got in the mail. But I hope youíll stick with me anyway – weíll get to the seed catalogs by the end.

Step 1 is to start with the money. How much do you need to earn from your farm?

There isnít one answer for all farmers. It depends on your living situation, your lifestyle, how many folks youíre supporting, and whether you have off farm income to help out.

So, choose an amount that you would like to put in your pocket over the growing season. This is your Profit Goal.

Next up: how much do you need to sell to make that much profit?

A good benchmark is to make 30% to 50% of your total sales as profit. This % is your Profit Ratio.

(Quick math reminder: 0.3 is the same as 30% and 0.5 is 50%.)

Divide your Profit Goal by your Ratio to get your Sales Goal.

Say you want to make $10k in Profit, and you want to plan cautiously, then aim for a 30% Profit Ratio. This gives you a $33k sales goal.

This $33k will be the starting point for the next planning steps.

But letís linger a bit more on these numbers.

Take your $33k Sales Goal, and subtract your $10k Profit Goal, this leaves you with $23k to spend on Annual Operating Expenses.

This gives you two things you can control:

  1. What you sell
  2. What you spend

By selling more and/or spending less, you can nudge that Profit Ratio to a bigger %.

And a bigger Profit Ratio means that either you make more money with the same work, or by working more youíll make more.

With a 50% Profit Ratio, you only need $20k Sales for $10k Profit. That is a lot less work than trying to hit $33k.

And if you did hit $33k with 50% Ratio, youíd have $17k in Profit.

And this is why itís important to start with the money. By knowing what youíre trying to get you can design how to get there.

So grab an old envelope. Write down your Profit Goal and your target Profit Ratio. Punch the division into the calculator app on your phone, and youíve got your Sales Goal for the year.

See you tomorrow in Step 2!


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