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Overcoming pitfalls on the path to profitability, by Alan Haight

When I started my farm, I had no business skills and not much common sense. My expectation was that I would grow beautiful organic produce, customers would embrace my farm enthusiastically, and it would all work out. I wasn’t wrong about any of those things, but there were pitfalls along the way to eventual profitability that delayed profitability and could have caused me to abandon what I considered to be my life’s work.

Among the many pitfalls I succumbed to, the worst were not establishing clear income goals, spending money for equipment and other inputs out of necessity without knowing how much I was going to earn in sales, using credit cards and what could have been personal income to meet short term cash flow needs and, at the end of the year, not evaluating the strengths and weaknesses of what I was doing (thereby inevitably repeating my mistakes!).

It wasn’t until my wife Jo joined me in 2006 that real planning entered into the equation, and I also took a Cooperative Extension farm business planning class that helped demystify what I needed to do to address the most threatening problems on the farm. By then, I had a substantial amount of debt, was dependent on a CSA production model that wasn’t working for our farm even though it provided a financial foundation to run the farm at a basic level, and I didn’t have the bandwidth or planning capacity to respond to new market opportunities that would better serve the farm. I was too busy working in the business to work on the business, a kind of treadmill that often besets market farmers working at small scale.

Yet, all was not lost. Within a relatively short time, our gross income was increasing by 20% per year, we were netting a good income from our small acreage, we paid off all our farm and personal debt, and we had confidence that we were on the right track and could successfully adapt to changing markets. And, we did this with no increase in acreage.

What made the difference? There are four essential business practices that I would recommend any farmer starting out adopt from the beginning, and would strongly recommend to any farmer currently in business that isn’t already engaged in these basic practices. These practices are: 1) establish realistic gross and net financial goals each season; 2) create an annual projected budget that reflects these financial goals; 3) adopt a cash flow strategy based on the budget; and 4) engage in a deep, year-end evaluation of business performance.

Many of us small farmers are proud of our lifestyle and of the fact that we have lots of good food to eat. We perform an essential service to our community, and we live in a manner that is deeply tied to nature and rejects the dependent, consumptive society in which we live. Those certainly are things to be proud of, but why not be proud as well as profitable? If we believe that we are performing an important service to our community and to the planet, wouldn’t it be good if we could also afford health insurance, avoid unnecessary debt, build farms that will survive for generations to come, and get a little time off once in a while?

Join Poppy Davis and me at the FarmLink Business Skills Camp for a discussion of how to bring these practices to your farm. You will receive a zip drive with templates for some of the analytical tools we will discuss, and equip you to use them to help strengthen your farm. [Photo by Liya Schwartzman]

About the author: Alan Haight is Vice President of the California FarmLink Board of Directors. Now retired, he started farming in 2001 at Riverhill Farm in Nevada City, California. Over the years, Riverhill’s diversified production of mixed fruits and vegetables has been highly regarded as a local provider of quality organic fruits and vegetables. Riverhill Farm is a community-based farm and is a meaningful part of the local food economy, with 85% of the farm’s produce sold within ten miles of the farm.

Note: This is the first of two articles by Alan Haight in preparation for the FarmLink Business Skills Camp.

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