It’s coming up on tax time!! As if you needed that dismal reminder.
This is the time of year when I take a bird’s eye view of my farm, what’s profitable, what’s not, and what are possible solutions.
Last year at tax time we had just finished up 6 months of trying once-a-day milking. After 6 years of twice-a- day I thought I’d give it a try, have my evenings free for a change.
After running the numbers for my accountant I realized that was a HUGE mistake on a 3 cow dairy. We were not breaking even. So we immediately went back to twice-a-day milking and having evenings off is now a distant memory…
Since I get so many emails and comments from raw milk producers on how to price their products, I thought I’d be so brave and give you my cost breakdown and how I come up with my price and offer you a valuable worksheet so you can do the same.
Then I created this worksheet so you can do the same. In my worksheet I have listed over 100 expenses – I was shocked when I put them all down on paper! I included some formulas in the spreadsheet, as well, so all you have to do is plug in your numbers and it will calculate the price you should be charging to at least cover expenses (+ 20% more for all the unexpected costs of running a small farm).
I have hesitated in the past to reveal actual costs because whenever I reveal anything like this there’s always some public criticism along with it. Also, this is going out to you farmers only, not the general public, so hopefully the backlash isn’t as strong. Also, these costs can vary greatly depending on where you’re located. Just 1.5 hours away from me many of these costs of running a farm business are significantly less.
Farmer’s Eyes Only
Remember, in a previous post I’ve stated never, EVER give your customers your production costs breakdown and I still believe this. Unless they are farmers, they have absolutely no idea what you and I go through to get these products to them and yet they feel they could easily cut out half your costs and never have a problem saying so!
So this is for farmers’ eyes only. I get the most inquiries on raw milk, so I created this worksheet with that in mind, but you could use this as an outline for when you’re pricing your meat, eggs, or other farm products, too. It’s mainly figuring out all the extra expenses besides just the hard costs.
I also have made notes on the download to explain things better. For instance, even on a 3 cow dairy I include a cost for a new cow each year. New cows may be needed to assure a steady milk supply during dry-cow period or any other reason I may need to replace a cow.
Feed + Labor Costs
I’ve included my actual feed costs, my land rental, labor costs + social security and medicare taxes I have to pay for my employees, an allowance for raw milk for the employees.
It seems like my supply list is endless. I’m constantly buying new jars, lids, rags, paper towels, filters, hand soap and on and on it seems! Surprising how these add up! List everything that you can think of in the worksheet. I listed all of the things I use to jolt your memory, but you may have more or less supplies than I do. Write it down!
Think of everything you use in your barn: shovels, buckets, straw, and any tractor work you might hire out. Some of these costs might seem minimal (like fly control in the summer) until I do my taxes and all those ‘minimal’ $200 and $300 charges here and there add up to lots of dollars during the whole year!
Budget for Replacements
Remember, nothing is really free!! When we started our dairy we had some hand-me-downs: a milk refrigerator, the pasture fencing was already in, and we had some irrigation. But slowly we’ve had to replace all those hand-me-downs so I realized even if it seems free initially, you’d better have future maintenance in your budget.
Office + Admin Costs
I even include a whole section in this worksheet on my marketing costs – website, email marketing software, internet, continuing education books/courses and office supplies for me and the desk in the store. Think about everything you use to run the retail side of your farm – paper, printer ink, phone bills, and more. All of these are costs that are essential to running your business, so they must be included in your raw milk price.
What is your Time Worth?
You’ll notice I include a pretty big cost for the time I spend in the office or with customers. Time = Money. How long do you spend each week with customers, suppliers, the vet, etc? On a typical day, I spend several hours answering emails, talking on the phone with customers, dealing with employees, and handling milk sales. You may spend a few hours a week driving and making deliveries, or spend a couple hours writing informational handouts.
Put it all in the Spreadsheet
I think you may be stunned at the amount!! I was!! If you’re not stunned at what your raw milk dairy costs, let me know why not!
So read through the downloadable excel spreadsheet & give the workbook a try yourself. I attempted to be completely transparent. Did I leave anything out? Is there a cost you have that I did not include? Scroll down and let me know in the comment section.
Also, tell me if this is helpful for you – were you as surprised as I was when I listed every single cost that’s necessary to run my raw milk business?
PS: Want more marketing help & a wonderful farm community? Join The Profitable Farm Private Facebook Group.