[Market-farming] RE: Econ. of scale

Rick Hopkins rdhopkins at americanpasturage.com
Fri Jan 31 12:45:40 EST 2003


David,

The graph I have is in dollars and units of production, not percentages.
That would show the difference between the input costs and gross income as
net profit in dollars.

Rick H.

-----Original Message-----
From: market-farming-admin at lists.ibiblio.org
[mailto:market-farming-admin at lists.ibiblio.org]On Behalf Of David
Heininger
Sent: Friday, January 31, 2003 9:42 AM
To: market-farming at lists.ibiblio.org
Subject: [Market-farming] RE: Econ. of scale


This is a great discussion but the lines between "profit", "profit margin"
and "profit percent" are starting to get blurred.  It's crucial that we keep
these straight so as not to compare apples to oranges, and to put the
emphasis where it belongs.

Yes, increasing the size of an operation and the incumbent increase in
overhead, labor etc will often decrease ones profit margin or percent.  This
does not mean a decrease in ones PROFIT.  Profit is what we all live off.
It is the real money that puts the clothes on our backs and diesel in our
tractors.  There is a common business expression "You can't take percentages
to the bank".

Percentage and margin numbers are vitally important as diagnostic tools in
analyzing the health of our businesses but they should not be the litmus
test by which we make our business decisions. Perhaps this is obvious, but
it is more proper that net profit analysis be at the forefront of the
expansion debate (along with those all-important intangibles like QoL
considerations) rather than percents and margins.

David
Black Mesa Ranch, AZ




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