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SPIN’s Point – Targeting Revenue

Courtesy of Wally S., Wally's Urban Market Garden, Saskatoon, SK

So many people are reluctant to ask the first question that should be answered before starting a new farm. And it's probably not the question you are thinking. It's not: "How much money can I make?" It's: "How much money do I want to make?"

The subtle change in wording represents a huge change in thinking. A farmer once said: "It's certainly an exciting time on the farm as it is the culmination of all of the year's efforts. The speculation will be over and we will know just what our production turns out to be. It's kind of like working all year but having no idea what you'll get paid until the end."

Who would want to go into a business where you have no idea how much money you'll make? The point behind the SPIN system is it gives you control over your income. Sure, the challenge of overcoming unforeseen variables is one of the attractions of farming. But income does not have to be one of them.

So after I turn around the question for new farmers, here's what I tell  them: Using the SPIN system, crops can be selected so that you can achieve targeted revenue. If you want to make $50K, you plan accordingly. If you want to make $100K, then you put another plan into play. Once you have your targeted revenue figure, you start breaking it down.

Let's say you want to make $50K. If CSA's are on your mind, as well as farmer's markets, a 20 member CSA in your first year sounds realistic. 20 x $500 is $10K. Then you need to make another $40K. Let's say you have a 20 week marketing period, from early June to late fall. $40K divided by 20 weeks means you have to make $2,000 per week, on average. If you are doing two markets per week, that means $1,000 per market per week. To make $1,000 per market you need to sell 400 units of produce at $2.50 per unit. Two markets per week, means 800 produce units per week.

Early summer might see this sort of production:
200 units of spinach
200 units of scallion
200 units salad mix
100 units radish
50 units pea greens
50 units green garlic

Mid summer might see this:
150 units carrots
100 units salad mix
150 units potatoes
100 units fresh herbs
100 units green/yellow beans
50 units pea greens
100 onion bunches
50 buches garlic

So you plan to get that sort of production into play. If those weekly sales numbers are not attainable at your farmers markets, then you might need to have a larger CSA, or consider restaurants. A handful of weekly restaurant sales can account for a good chunk of your weekly sales.

Of course, unforeseen variables will affect your targeted revenue, either downwards, and sometimes upwards, and you'll make mid-course corrections accordingly. But if you use revenue targeting, you'll be in control of your business. For suspense,  go to the movies, not your farm plot.

To see  SPIN's revenue targeting formula in action, have a look at this youtube video series.  

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