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market-farming - [Market-farming] Farm scale, economics, and quality of life-PART 3

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  • From: JOHN A HENDRICKSON <jhendric AT wisc.edu>
  • To: Market Farming <market-farming AT lists.ibiblio.org,>
  • Subject: [Market-farming] Farm scale, economics, and quality of life-PART 3
  • Date: Sat, 18 Dec 2004 22:43:14 -0600

I have received the go-ahead from list manager Liz Pike to post some
older compiled clippings from this listserve that relate to economics,
farm scale, and quality of life. Per her suggestion, I am dividing them
up into 3 posts. I should note that I took the liberty of cutting some
material from these posts and doing some minor grammatical editing.
Here is part 3 of 3. -John
----
“My experience is that the first $20K net is the easiest to make. After
that the gross has to go up far faster than the net. In other words, the
ratio between gross and net gets larger the more your target income is.
For each additional $5K net, you need to do proportionally more
business. I see many operations operating below a minimum scale
threshold, afraid to grow when it would actually make their lives
easier. I believe that profitable operations operate at 60-80% of the
capacity of their invested resources [equipment, hired labor and land ].
More than this range does not allow for flexibility and will also lead
to break downs of equipment people and land. Less than this range and
the operation will get buried in overhead.”

“In greenhouse vegetable growing there is a definite jump in costs as
you go up the scale. The first approximately $40,000 can be handled by
a single person working full-time, packing produce on a table in the
greenhouse and delivering in the family van, storing produce in small
coolers. The next step up in volume requires at least a part-time
worker, decent packing and processing facilities, a delivery vehicle and
a second greenhouse. It's a step-function, not a curve, and that first
step is a killer. I'm standing at the bottom of that step right now.
You have to be real comfortable with your ability to increase your
market way above and beyond those increased costs for it to be worth the
financial risk. And then you have to be prepared to see some decrease
in your own productivity as you have to spend time managing those extra
people.”

“I have always liked one thing I heard Eliot Coleman say; 'when you have
reached the limits of a particular scale, do not expand, raise your
prices.' [paraphrased].”

“The question of scale is not just one of profit, it is also a question
of 'quality of life as defined by myself.' We are often faced with
several scenarios that produce roughly the same 'profit' but have wholly
different outcomes in terms of quality of life. Low on my quality of
life gauge is spending most of my time managing employees and sitting in
front of a computer. More important to my quality of life is working
the fields myself along with my children. For another person the reverse
might be true and is just as valid. The important thing is to know what
your life goals are or you will end up in a situation you never wanted
and that no amount of profit will justify.”




  • [Market-farming] Farm scale, economics, and quality of life-PART 3, JOHN A HENDRICKSON, 12/18/2004

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