Brace yourself, you’re about to see my 2018 farm budget. It’s going to shock you a little bit. You may feel surprise, exasperation, perhaps some jealousy and even a little frustration. You may think to yourself, “Wait, how is this possible?”
Or, you may find yourself saying, “Yeah, that’s about what I expected. I’m comfortable with that. I’d love a little more clarity, but based on what I have seen from John’s channel this is what I am expecting.“
Whatever your reaction ends up being it is important to read this blog post entirely. If you don’t hear me out with what I have to say than I don’t hold your opinion valid. If you skim you’re not going to get the whole picture and that’s potentially troublesome for both you and me. I’ll explain the trouble at the end.
A Healthy Dose of Perspective
Keep in mind as you go over my budget that my situation is unique. I am in charge of the farm side of Connecticut’s first and only farm brewery. There is no other case study where people are trying to do what we’re doing, where we are doing it. There are a few similar operations elsewhere in the country, but everyone’s story is different.
Then you remember that we have a distillery, and another layer of complexity gets added to the puzzle that is my 52 acres.I have created a plan that hopefully ties together the farm and brewery and then long term works to tie in the distillery.
If I was “just running a farm” my plan would look different. I wouldn’t have to manage brewer’s grains, I might not grow hops, and I certainly would not benefit from having a tasting room on the property to bring customers in. I enjoy doing all of those things, but for the farm it doesn’t always make sense financially.
This is not a case study on how farms should be run. It is my story for how I am dealing with the biggest challenge I have faced yet in life. While I would love for things to be easier and the design more simple I appreciate and accept the challenge. I am willing to do whatever is necessary to move the whole project forward.
This is a Living Document
What can be difficult to grasp is that plans and budgets are living documents.
The best laid plans of mice and men often go awry.
You can put literally anything on paper. Give me an idea, a computer with Google Drive, a cold beer, and a day and I can make a spreadsheet say whatever you want and write an narrative that backs it up. A plan and a budget give you a starting point, they lay out goals, and then you have to go out in the field and live it.
Plans are going to change. Everything is always more expensive than you think and take longer than you planned. That’s just life.
You can tell I have reservations about releasing my budget because this whole blog post is basically one large disclaimer, haha. ¯\_(ツ)_/¯
Budgets will change as you try hypothesis, adjust to changes in the market, and get real data from the plans you are now acting on.
Budgets are great for planning. Then you need to get into actual tracking. Using a notebook, a Google sheet, and excel file, or Quickbooks or some other accounting software, you need to have a handle on your finances. Having a handle on what’s happening with money-in / money-out informs your decisions and sets you up for success better than making a plan at the beginning of the year and then flying in the dark hoping you make it until the end of the year.
My budget will change as I find creative ways to find money and balance farm tasks. That, and many of the things I have planned in 2018 are one-time tasks that I won’t need to repeat going forward. So the budget for this year won’t apply to 2019.
What a Farm Budget Does
Having a budget allows me to have an informed conversation with my partners and my family. After 4 years of working this piece of property and helping this business grow I have a decent handle on what we’re capable of and what part of the equation I serve.
This plan and budget takes into account the needs and desires of the other people and enterprises involved. Instead of just giving a vague “yes we can do that” or “no we can’t do that” I can say, “yes, we can do that, but here’s what it’s going to cost us.” Then we get to decide what is absolutely necessary for us to function and make a decision on who is going to pay for it.
Let's just start with income and what I do or do not have accounted for. My focus from my farm plan is to build onto the brewery. As such I have scaled the farm to where I am only doing things that directly overlap with the brewery.
This plan has 2 batches of 240 broilers, no pigs, and a whole lot of effort into hops. We know that the hops aren't going to completely cover themselves expense-wise. I also put a pessimistic number as my place holder because I honestly don't know what I'm going to yield precisely. Local hops in our area go for $16 a pound, that an expense offset that I could save the brewery.
The event admissions is our hop harvest festival that we host annually. It's a fund day and it makes us some money.
COGS - Cost Of Goods Sold
Cost of Goods Sold is any expense that you have that is required to sell a specific product. Chicken feed is an example of COGS where a chicken tractor goes into another expense category. Buying started plants from a nursery is COGS where putting up a greenhouse is a different kind of expense.
Here's the real meat of my expenses. Discretionary is anything I choose to spend money on, non-discretionary is anything that I have to pay regardless of what I choose to do.
There's a variety here and we can pick them apart further in future blog posts if you have a lot of questions on what exactly is here. What it boils down to is equipment maintenance for all the machines, fuel for the truck and those machines, memberships to CTNOFA and the Farm Bureau, some office expenses like marketing and permits, and rent and insurance.
Oh yes, my farm rent is ridiculously low. The land owner is a part of the business and we have reached an understanding on how much I am able to use this property for agriculture and how much it costs him in taxes year to year. I'm lucky and I know it. That said, farming this particular piece of land is rather difficult.
Most of this category is my salary. I have a placeholder of around $5,000 for bringing in Kate to help with projects part time through the season. But for the most part it's just me.
This budget brings to light an interesting topic, and that’s exactly how much money I make. I am an operating member of my company. That means I own stock, I have skin in the game, I’m fully invested, I’m all in, I’m part owner, however you want to write it.
The number can vary slightly but pre-tax I make roughly $38,295. Taxes for me are about $1,000 a month which brings me to $26,295 take home pay. That’s roughly net $2,191 a month. When you consider my rent alone is $1,200 a month I’m not a very rich person.
IN this budget I have a $6,000 offset from my normal salary. Since the farm slowed so much in the winter I found some work to offset my salary from the farm and still get things done around here. I am doing a bunch of land management projects for the land owner here. Taking down trees, clearing stone walls, spring plantings, etc...
I have thoughts of sharing one month of my personal budget in a future blog post but Kate and I are discussing the ramifications of doing that considering how many people we know personally who read my blog and watch my YouTube channel.
I have no complaints about my life and my pay. I know the whole picture and I know what it takes to be me. Considering I used to live on a bicycle with all my worldly possessions fitting into saddlebags I’m doing just fine. I love what I do and I’m dedicated to seeing it grow.
Farm Budget Summary
There it is in all of it's glory. My 2018 farm budget. In accounting terms the parenthesis means a negative number as you may have guessed.
What this doesn't show is that I manage things for the other operations. That is more difficult to itemize. I only compiled the budget to reflect what the farm does directly.
The Trouble With Skimming This Blog Post
If you only glanced at my finances, perhaps even my just focused on my bottom line then we run into a couple issues.
You are taking a number at a just a number without any of the context and all too important holistic decision making that went into that number. That number provides a simple data point for the complexity that is my specific farming operation.
My fear is that you may take that and say “small scale farming just doesn’t work, there’s no profit, no life in it.” That is simply not true. I have a complicated set of problems to solve that come hand in hand with a complex set of opportunities. I have had profitable operations in the past, and small scale farming can be profitable, but we are trying to do something with our farm brewery that requires investment.
Remember that my budget at the time that I am publishing this blog post is a starting point. A snapshot in time. I created a plan based on our whole vision and I drew up a budget that reflected that. With this knowledge in hand we can make an informed decision to move forward, or change it.
Knowledge is power. The “finance side of things” is the hardest to figure out. It doesn’t always work in your favor but at least it is a place to start based on the best information I can put forward at the time.
I mean, if I haven’t beat the horse enough, just remember that there’s no way I can fully encompass everything in one blog post and stick with me as I continue to write the story and share it here.