2018 Numbers

Time for my annual accounting where I try to create a single number that says something meaningful about how the farm did financially. This year, more than the past few, I feel like it’s obvious that numbers in accounting are malleable and really don’t tell the full story without a lot of context.

The single number I like to put out each year is the dollars generated by the farm, per hour worked, after (non-labor) expenses. You can look back at last year, and years before that, by going to the blog post on 2017 Numbers. Here are the basic numbers for 2018:

  • Gross income – $39,712
  • Non-labor expenses – $8,247
  • Total hours worked – 1850

The basic math gives a net, pre-labor income of $31,465 for 1850 hours worked, which works out to $17.01 per hour.

That hourly number is before any payroll taxes, so if you’re trying to compare it to an actual hourly wage you need to lop off a chunk. Even so, we’re probably close to the $15/hr range, which feels pretty good, and actually gets us to the target minimum wage for this part of the country. Unfortunately, that still means that folks at the bottom of the pay scale are below that. We’re relatively flat in our pay structure and this year I was able to pay bonuses at the end of the season that made it even flatter.

These are very ball-park numbers even though they look exact. The gross income and hours worked are actually pretty exact, but it gets a little fuzzier when we look at expenses.

I’ve included some non-cash expenses in the expenses – essentially depreciation on equipment like the walk behind tractor and implements, and other structures. I’m pretty consistent about this in my own calculations, and it helps to even out the picture in years that have drastically different investment levels in tools and infrastructure. Beware that if you’re comparing to your numbers our methods might not match.

This year looks better than the past few and here are my best guesses on the reasons why. The primary reason is luck. A lot of things lined up for us this year: the weather was pretty good, we had great folks working with us who were available at the right times, and we were able to sell most of what we produced with very little waste. Certainly we set ourselves up to take advantage of those kinds of conditions, but even with experience (and partly because of experience) I know that there was an element of luck that certainly helped and we won’t have that every year.

Another factor that’s making the 2018 number look better than previous years is that we went really lean on expenses this year – something that probably isn’t sustainable. We weren’t sure if it was going to be our last year on the property (turns out it looks like we’ll get another year, maybe more) so we relied heavily on the tools, seeds and supplies we had on hand and didn’t have to spend much on non-labor expenses. I actually invested in a few tools for 2019 right at the end of the year but I didn’t put those expenses into the above numbers. If I had they would drive the non-labor expenses up by almost $2000. That changes the hourly number to $15.93. With luck, those investments in tools will improve our efficiency enough to pay back at least a portion of that $2000, and they should probably also be depreciated as they will mostly all last numerous years.

A few final pieces of context here. You can go to cullyneighborhoodfarm.com to get a better sense of the scale and practices of the farm. We’re growing on a lot that’s just under an acre, with just over ½ an acre in production. We’re not pushing our production particularly hard relative to many compact farms. Nearly all of income comes from CSA shares, but do make a little on top of that from some mid-season farmers market sales, by selling extras straight from the farm.

I’d love to see this same basic analysis from other farms and I welcome ideas for improvements to my method.

2017 Numbers

Every year I take a look back at the previous year to see how we did and what I want to do better in the following year. Part of the analysis I’ve been doing is to add up the gross income and then subtract out the non-labor expenses. This gives me a net for all of the hours of work that went into the farm. Then I add up all of the hours worked and divide. This gives me a net per labor hour.

You can look back at my write up from last year to get a more detailed explanation of how I’ve been doing this over the years (and links to more write ups from years past). Instead of making this a long post I’ll just refer you back there for the explanation.

In 2017 I worked with Matt Gordon at Cully Neighborhood Farm again. We grew for 60-ish CSA members, and sold a little excess produce through the Cully Neighborhood Farmers Market. We grossed about $36,500 on about 1/2 acre so roughly $73,000 per acre, down very slightly from 2016. The non-labor expenses was about $10,000. Adding in the depreciated BCS expense brings that number up to about $10,940, a little under 30% of gross so we were able to keep the expenses down this year, despite making some infrastructure improvements that really improved ergonomics on the farm. The total hours worked on the farm, including marketing and administration, field work and everything else, was about 1910 hours, so we cut that back a little as well. That gives a (pre-tax) dollar per hour number of around $13.40 across the farm, up almost 4% from last year, which was better than inflation so I think we’re making progress.

For those with an eagle eye, you’ll probably notice that we’re right around Oregon’s minimum wage when you adjust for a “loaded” hourly wage (one that includes payroll taxes). Still, the bottom line is that for now I’m happy with that number for 2017 and we’ll take that information, along with the rest of the numbers we’ve collected and see if we can continue to improve in 2018.

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.