Page 12 - Farmers

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delegate this job to a non-family
member, you leave yourself open to
theft because they can fail to record
some of the products they loaded
onto the truck. You may think taking
inventory is a lot of work, but once
you get onto it, you will find it has
great benefits:
• By taking beginning and ending
inventory, you get a better handle
on what to pack for the next week,
as well as next year on the same
week, because you have a record
of what was sold, week by week.
• You can also calculate the
wholesale value of the different
products you take to the farmers’
market and track your gross profit.
If you have a handle on your
expenses going to market, you
can also calculate your net profit
(before taxes).
• By plugging in the retail value of
everything that was sold, you can
calculate what your gross profit
should be. And once you have that
number, you will know if someone
is stealing from you. The “Tracking
Cash Sales” section will explain
this process
Determining Your
Retail Prices
It is important that you are involved in
setting the retail price of all products
based on discussions with everyone
involved in selling at the market. To do
this, you need to know the following:
• what inventory was sold at the
• at what price each product was
Adjusting prices once at the market
can still be done. Either give your staff
the authority to adjust prices based
on what other vendors are charging
or insist they contact you to discuss
price adjustments.
This “Decision Making Tool” does not
calculate your costs of production
on the different crops you choose
to grow. It is recommended that you
track your costs of production so you
know what retail price will give you
sufficient profit for your family’s work.
Other farmers believe that half of the
retail price should be profit. In that
case, labour is 25 per cent, cost of
production is 25 per cent, and profit
is 50 per cent. So, if it costs you $2 to
harvest those beans, then you would
multiply $2 by four, which would give
you a price of $8. As such, if you want
a profit margin of 50 per cent for your
beans, then your retail price would
be $8.
You also have to take into account
what your competition at the farmers’
market is charging for those same
beans. You need to stay competitive
on “commodities,” those items that
several farms are selling at the same
farmers’ market. If your prices are
out of line without your beans being
somehow unique, yours will not sell.
If it is costing you one half of the retail
price just to harvest a product, and
the other half is cost of production,
leaving no profit, you may want to
reconsider offering that product the
next year.
Rule of thumb:
Track your harvest labour by
commodity. For example, let’s say
on average your employees pick
five baskets of green beans per
hour. If you are paying $10 per
hour, each basket of green beans
costs you $2 to pick. Some farmers
figure that harvest labour should
be one third of your retail price,
so if labour is one third, then retail
must be $2 divided by 0.33 or $6.
This rule of thumb says that of
the retail price, one third is cost of
production, one third is labour and
one third is profit.