End of Year Financials

white board

Back when Slow Hand Farm was its own tiny CSA I used to post end of year financial reviews to give everyone a look under the hood. It was also a good exercise for me, whether I shared the numbers or not, to summarize them for myself and put them somewhere to (relatively) easily check back with them. The first post was actually on the topic was actually in March of 2011, titled “The Bottom Line”, it summarized the first two seasons of the farm, distilling the numbers down to the dollars per labor hour the farm returned – roughly $9 in 2009 and $7 in 2010. In 2012 I got to the numbers a little earlier and in January I wrote a post titled “Final Numbers for the Year” and added a little more information on dollars per hour, gross per acre and expenses as a percent of gross income. My last post on the topic was in January of 2013, titled “2012 Financials”. 2012 was the last season that the CSA ran under the name Slow Hand Farm and after that I folded it into Our Table and the financials because way too complicated as they were tied in with the start up of a much larger and more complex project, of which the CSA and vegetable production was just a small part. I may have written something in those intervening years on the Our Table blog, but I’ve lost track if I did.

Last year I worked with Matt at Cully Neighborhood Farm where the financials are a little more straight forward. Matt was kind enough to agree to letting me share some actual numbers from our 2016 season (actually he also shared a full sample budget projection in my new book, Compact Farms).

The two numbers I find most interesting when talking to other farms are the dollars per labor hour and the gross per acre. The way I calculate dollars per labor hour is to try to separate out all non-labor expenses and subtract that from the farm’s gross. With any large capital expenses I try to estimate depreciation to spread those out. For example, Matt bought a brand new BCS tractor with several implements last year and we took that purchase and calculated a 10 year straight line depreciation when running the numbers, meaning we only applied 1/10 of the expense to the 2016 season, and he’ll continue to do that for 9 more years (unless he sells it first). I actually didn’t do this with any of the Slow Hand Farm years, but I also never had any truly large purchases (there were a few that could have been spread out a bit in retrospect). If you go back and read those posts you’ll notice that non-labor expenses were quite low, 18-20%.

For labor hours we estimate the total labor hours worked on the farm during the season. This wasn’t too difficult as we keep pretty good track of hours worked with most of the folks working on the farm taking an hourly rate. Matt was the wild card, but he was able to go back and recreate his season fairly accurately – the weekly schedule for a particular season doesn’t vary that much.

This dollars per labor hour calculation is my way of trying to compare farms that have very flat management structure, to ones that have many more workers and a wider range of wage rates. It also gives a better comparison between farms that don’t use hourly wage rates at all and farms that do, or that use a mix of the two.

The gross per acre number is the easiest to calculate. I typically include all of the cultivated space including pathways between beds, but not infrastructure area, or roadways, or unused areas of the property. But it could be calculated with those. For comparison it’s better to at least know which way it was calculated, especially on small, intensive operations.

Neither of the numbers tell the full story of the farm, but I do think they’re an interesting starting point for further discussions on the topic – both farmer to farmer, and farmer to farm customer (or whatever you want to call the people who support the farm but don’t actually work on it).

So, for the 2016 season here’s how the numbers came out. We grossed about $37,000 on about 1/2 acre so roughly $74,000 per acre. The non-labor expenses, including the depreciated BCS expense, was about $13,200, a little more than 37% of gross. The total hours worked on the farm, including marketing and administration, field work and everything else, was a little less than 2000. That gives a (pre-tax) dollar per hour number of around $11.90 across the farm.

Matt used less rounding and ended up with a number of $12.09 per hour, a difference of a little less than 2%, but to me an “exact” number isn’t the point. Our estimate of hours actually worked probably isn’t even that accurate. If you think about working an 8 hour day (480 minutes), being off by 2% means a little more than 9 minutes – how many times did you work 9 minutes more than you actually recorded, or how often did you take 9 minutes of personal calls, or texts over the course of a work day? Not to mention all of the fuzzy areas like posting photos to social media (advertising for the farm, or personal post?) All that to say, I think 2% is a reasonable margin of error.

I was pretty happy with these numbers but I think we can get it up a bit next year, mostly by not over-planting quite as much as we did this year (always a tricky balance), and by continuing to make small changes to streamline most everything we’re doing – especially in terms of weed control and washing and packing. Technically the farm really needs to hit $15 per hour in the next few years as the legal minimum wage in Portland is headed that direction. Stick around and we’ll see how long it takes to get there.