S5 ● E12 How much does it cost to run a farm?

So in today's video, I want to look at the overheads of running a business like this. We're often focused in on individual enterprises and looking at how they operate and the profitability of them as individual units. But there's a lot of overheads in running a business like this, and each enterprise we run must contribute to those overheads. And as a business grows, and as you get more complex in the business with more enterprises, those overheads tend to grow too. Some of them are obviously fixed, some of them grow as your enterprise and product base grows. So here we are looking at a spreadsheet and this really goes through some of the basic numbers that contribute to running the farm. So I'm just going to run through them. It's maybe not the most exciting video in the world, but I think it's really important to stay. So I'm just going to go through and total it up to run our farm for the year. The sort of current levels of production costs about €25,000 in overheads. That includes a whole bunch of different stuff that's needed to run the enterprises and some things that are shared between the enterprises, like vehicles, for example. Now, in past videos I've presented this in different ways where I've taken delivery costs or fuel into the individual enterprises. So it all gets a bit mixed up and it's a bit complicated. But a neater way to do that is have general overheads that are contributed to by each enterprise. So in this video we just focused on overheads. We have a lot of food and water controls to be able to feed people at the farm and also to be able to run a slaughtery, etc. So we put about €500, I'll do this in euros, about €500 into that. We hire the farm from the. We have a firm that owns and deals and manages the agricultural property here in Sweden. And the Farm ab, like the limited company, rents the farm at cost. So that's about €8,9000 a year, which covers things like insurances, electricity and Internet and things like this. And this is all put out in a monthly inflow, outflow sort of setup because we need to balance cash flow ultimately. So this financial sheet needs to be integrated with the in and outgoings of each individual enterprise. And we've built up a record of how to do that over the years. We have a fund of €10,000, that's about €1,000 for general consumables, and we have a repair budget for basic hand tool machines of about €750. And then there's office stuff, printing and marketing, about €700. Other office use, cell phones post about €900. Insurances programs and websites adds up to a thousand euros. Taking consultancy in terms of this is in the case of bookkeeping and things like that, we take some outside consultancy on the best way to organize that. It comes to less than €1,000. Then we have considerable bank fees. So we use swish, which is a way of paying on your phone. Here in Sweden we have bank fees, we have isettle fees. That's like a mobile card reader. So those things add up to about €1,000 a year. And then we have about a thousand euros for external services throughout the year. That comes to about €16,000 in some of the basic overheads. But then we have two other sections in this spreadsheet that look at overheads. One is just to do with vehicles at the farm, and that's our van for deliveries and picking up goods, as it were, and the rhino that we use to pull the eggmobiles and for general farm chores. So based on that, with insurances, we put about €500 a year into insurances for the van and about €3,000 into fuel for all the delivery and picking up materials, etc. Well, budgets are separate, but we have about €750 in repairs annually. And for the rhinos, a couple of thousand euros, a couple of hundred euros to insure. And we put about €300 of fuel in that and a couple hundred euros for repairs, ideally. And then if we add in other transport costs for things that are delivered to the farm, that comes to about €1500 a year with some budget for repairing as well. So about €6,500 going into vehicles and repairs of those machines. And then we have other general costs categorized for the farm enterprises, things like hiring a freezer room. Now, obviously hiring a freezer room goes up in price the more cubic meters you store. And as our product portfolio grows and we have more products that we freeze down, that obviously grows, but that comes to just less than a couple of thousand euros a year. We have very little animal husbandry bills. In terms of vet bills, we don't use vets. And so most of the animal costs are wrapped up in the enterprise individually. And we have a budget for consumables and, you know, a bit of a contingency fund. So this section adds another sort of €3,000. So all in all, this comes to about €25,000, which is what it takes to just operate the business, you know, to have all the things we need in place to be able to run the day to day operations. So each of the enterprises we run, which is primarily pastured layers, pastured boilers, the market gardens, microgreens, we also have the turkeys, pigs, etc. They must all contribute towards this before we get the outcome of the year from which salaries can be drawn. It's quite a sum. It's a small fraction of the revenue produced by the farm. And it's interesting because by the time you take that away and take your taxes away here, it's pretty much 50% in terms of if you have €100,000 left in profit, you're essentially by the time you've paid your individual tax and the business has paid its employee fees, as it were, there's only €50,000 left for paying wages. So we need to drive a lot of profit to be able to pay the salaries at the farm. And so keeping these overheads low is really important. But it's pretty good for a business that turns over the amount we do. And it's something that you can always work on. But it's important to really consider this in the planning process because this doesn't include any real long term investments. They need to be paid for by the actual enterprises. So putting up a new greenhouse, that's a cost that's paid by the market garden and also the laying hens because they're using that space in the winter. It's an important thing to understand. You know, like all of your, you can't just plan the enterprises, that's an important thing. But you need to really look at your overheads. It's very hard to give a sort of formula for that because it's going to look so, so different in every unique time, place and circumstance that you know, you need to really work that out for yourself. And that's why our spreadsheets are all linked together where you're having a overall control sheet. So each enterprise has its own unique in and outgoing sheet so we can see the cash flow within the enterprise and then they all come together in sort of overview sheet of the whole year, which allows us to track the whole picture much easier. Anyway, that's it for today. It's a big subject and I hope some of you find it interesting just to see some of the costs associated with that. I think some of you starting up will have a lot lower costs initially and that's great. I think this is a cost that's two and a half times what it was when we were starting out and that's because we're turning over a lot more revenue and have a lot more products and a lot more volume of products. So it's, you know, it's the way it is. A lot of our running costs are actually reduced because we're not going to have so many people around anymore, which is nice. It saves us a whole bunch of money and time also. So I hope you found that interesting. Just a little bit of the background insight there. And I'm considering how to frame this in the marketing section of the book I'm working on now about planning your farm. You can find out a lot more in our book, Making Small Farms Work. And you can support the channel to Grow to have more videos like this by clicking subscribe and also supporting us on Patreon. Thanks for watching and we'll see you next time.