Like most small businesses, our farm took several years to make a profit. After starting farming as a side hobby in 2019, we gradually grew our business until I quit my job at the end of 2022 to farm full-time alongside my husband (see my article “Making the leap to farming full-time from the September 2023 GFM, and my interview on the GFM Podcast, for more on that). With this huge change the pressure was on. If we were going to keep on farming, the business finally needed to become profitable. I’m excited to share that we pulled it off. Here are 11 things we did that helped us go from profit-less to profitable.
Set a realistic goal
Hop onto any market gardening forum, and you’ll find profitability claims are all over the place. I’ve seen growers brag about 20 percent, 30 percent, even 50 percent of their gross revenue being profit. As a new farmer, those percentages felt huge. As it turns out, they’re probably unrealistic, especially for farmers just starting out. According to the USDA the vast majority of small farms aren’t profitable at all.
Our extension agents at Rutgers University recommended a realistic profitability goal for new farmers in our area to be around 8 percent to 12 percent, which felt a lot more attainable to us. In future years, we hope to go as high as 20 to 25 percent in terms of profitability, but in 2023 I’m pleased to report that we hit 13 percent — right on target for our goal.
For the purpose of this article and these percentages, I’m using a simple definition of “profit” to mean my income minus my expenses, and for “profit” to include my (and my husband’s) salary.
Hired financial experts
One of the first things I did after quitting my off-farm job was book a meeting with our accountant, who specializes in farms. He was able to provide us with valuable information on how to best set up our business with the goal of profitability. For us this meant converting the farm to an S-Corp and starting to pay ourselves salaries for the first time. Our accountant was also able to advise on key deductions and expenses, such as taking our health insurance premiums as a farm expense.
Better understanding the labor costs of key crops has helped us price flowers in a way that preserves profit.
We also met with a farm-specific bookkeeper to help us adjust our Chart of Accounts in our bookkeeping software and set some specific goals. Finally, we met with our insurance agent. While we previously had basic farm liability insurance, having a detailed, in-person meeting around our insurance coverage helped us to understand what would be protected in the case of an emergency. Going forward, we’ll have this insurance review on an annual basis to ensure our assets are properly insured.
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Talked to farming experts
In addition to meeting with financial advisors, we also hired farming professionals to advise us on our business. Throughout the year, we worked with Ellen Polishuk (Plant to Profit), who helped us work through all kinds of issues — from improving our fertility through detailed soil analysis to advising on issues like labor difficulties to helping us better mechanize certain aspects of our farm.
It may feel counterintuitive to pay for a farm advisor when so much good information is available for free. But we found one-on-one coaching with a successful farmer paid for itself immediately. We saw increased yields and felt more confident in our management skills.
More recently, we worked with a coach for our specific crop: cut flowers. We hired Michelle Elston from Roots Flower Farm. Michelle helped us work on flower-specific efficiencies like what tools would speed up harvests and how to set up our bouquet-making station for maximum speed. Michelle also helped us dial in our succession planning for specific crops.
I have noticed a lot of farmers advertising coaching services, so definitely do your due diligence on their experience before hiring someone. I had seen both Ellen and Michelle speak before hiring them to coach me and visited Michelle’s farm during an annual tour. With many years of experience as profitable farmers, they were trusted advisors with so much to share.
A final farming expert I was connected with was John LaSalle, who became my mentor via the Association of Specialty Cut Flower Growers (ASCFG) mentorship program. For two years, John advised me on issues like pests/disease, winter production, and staff leadership. John grows many acres of dahlias and guided us through scaling up our own production. Having this guidance from a third generation flower farmer was invaluable.
If you’re a flower grower and haven’t yet joined the ASCFG, I can’t recommend it enough. And if you grow a different crop, seek out your relevant industry organizations to see if they offer a similar mentorship program.
Made our chart of accounts work for us
This one is based on a tip I learned from Julia Shanks (author of The Farmer’s Office) at a conference several years ago. Like a lot of farmers, our initial chart of accounts in our bookkeeping software was set up following the basic categories on our Schedule F, as was suggested by our accountant. However, these categories are very broad and do not provide a lot of valuable information about our business.
We broke them down into more detailed categories. For example, instead of just “Seeds and Plants,” we now have individual accounts for items like Lily Bulbs, Dahlia Tubers, and Plugs. This makes it straightforward to see exactly how much we’ve spent on these crops throughout the year.
We also broke our Supplies category down into subcategories like Growing Supplies (e.g., irrigation, drip tape) and Post-Harvest Supplies (e.g., Kraft paper, rubber bands).
Another example is the line for “Gasoline, Fuel, and Oil.” We now have individual subcategories for Tractor Diesel, Delivery Van Gas, and Greenhouse Propane. The result is a detailed Profit & Loss report that helps us understand exactly where we are spending our money and where we could try to spend less.
Checked the numbers every day
During our first few years running a business, tax filing time was a nightmare of late nights combing through old receipts and emails trying to figure out all of our expenses. We never knew exactly what our profit (or lack thereof) would look like until we were done with this task, which usually took several weeks.
Over the last year, I have built a new habit of reconciling our accounts every day. I do it over my morning coffee. By updating our books daily, it never takes more than a couple of minutes each day. Each morning I reconcile our bank statements and categorize our expenses, as well as add any sales that came in for the previous day. This means that, on any given day, I can see a pretty accurate snapshot of how the business is doing.
I’m using Xero for our bookkeeping, rather than Quickbooks, in large part because of its robust mobile app. This allows me to check our numbers every day right from my phone, rather than having to break out the computer.
Preparing documents for our accountant this year took under an hour, thanks to our up-to-date financial records.
Obsessed over cash flow
When we began to rely on our farm as our sole source of income, cash flow became a big deal. Like most farms, our sales are all over the place depending on the season, with our biggest sales days in the early spring and late fall. Likewise, our expenses ebb and flow. When our bulb bills are due, the five-figure expenses can be a lot to handle.
Carefully tracking cash flow has eased financial anxiety and better helped us in business planning. I created a simple spreadsheet, with a column for each week of the year. There are rows for categories of money coming in and going out of our bank account. The spreadsheet helps us think months ahead to when a large bill is coming due or we expect a windfall from a holiday market and ensure we’ll have enough cash on hand to cover ourselves.
It also helps us predict and resolve cash gaps. For example, I noticed we’d need to pay off a large bill covering ranunculus bulbs last fall, but that our CSA wouldn’t launch for another week. We adjusted the CSA launch date in order to have plenty of necessary cash.
Also to ease cash flow, I have negotiated better payment terms with some of our suppliers. Our main plug supplier now allows us at least 60 days from shipping until payment is due. One of our fall bulb suppliers has agreed to “Easter Terms,” meaning our fall bulb bills are not due until Easter. Negotiating these payment terms has added a lot of flexibility to our ability to manage expenses.
I check our cash flow situation every day when updating our books. It only takes a few minutes, but has ensured we are never in a cash emergency.
Set a budget and stuck to it
After meeting with financial and farming advisors, and getting our books under control, I had a much better idea of where all our money was going. The trick now was to actually keep some of it for myself. Speaking with a lot of farmer friends, it sounds like many of us (myself included) are not taking a particularly intentional approach to budgeting. We spend money as we need to and as the crops demand, and hope it all works out in the end.
Back when I worked in IT for large companies, we were always allocated an annual budget for our department to spend on staffing, hardware, etc. If we ended up spending too much in one category, we’d have to make up for it by taking money away from somewhere else. Why not try adopting this approach to our farm?
Using the previous year’s numbers as a starting point, I set budgets for different categories of our expenses. It was helpful to think in terms of percentages of our gross revenue, rather than fixed numbers. For example, we budgeted 30 percent of our gross revenue to spend on labor and payroll (including payroll taxes). As our revenue projections increased throughout the year, we were then able to bring on additional staff based on our budget.
Having a budget is especially helpful when it comes to purchasing plants and seeds. Like most farmers, I’m a plant lover and it can be easy to overspend when trying out interesting new varieties. But setting realistic budgets has helped me from going overboard while still leaving room for experimentation.
Eliminated sales channels
It was very tempting as a newer farmer to sell to anyone who was buying. Farmers markets, CSA, florists, local wholesalers, co-ops, pop-up craft fairs, farm stands, cake decorators — we were selling to them all! When I took a closer look at our numbers, however, it was clear that only a few of these outlets were responsible for the vast majority of our sales.
We dropped several sales outlets including florists and focused our efforts on our most successful outlet: farmers markets.
For us, retail was the clear winner, with over 75 percent of sales coming from farmers markets. I was shocked when I looked at our records and saw that we had made only 0.5 percent of our revenue selling to florists. Dealing with florists certainly took up a lot more than 0.5 percent of my time.
We eliminated florist and wholesale sales, stopped doing one-off pop-ups, and even dropped one of our farmers markets that was under performing. By focusing our energy and crop plans on fewer outlets, we were able to maximize sales and efficiency. In turn, our revenue grew despite dropping outlets, as we were better able to tailor our efforts to the outlets we did keep.
Narrowed down our crop plan
Just like trying to sell to everyone, it was tempting to try growing every weird cool cut flower out there. When we first started out, our crop plans were all over the place, our seed orders were out of control, and we weren’t growing anything particularly well.
We narrowed down our crop plan and focused on flowers our customers really love, like dahlias.
We knew we had to narrow down our crop plan, but how to choose what to keep? We drew a simple Venn diagram. On one side was “Crops our customers love” and on the other was “Crops we’re good at growing.” We decided to focus on the crops in the center of the diagram, those that we knew we could sell and that we knew would grow well. For us, this included anemones, lilies, tulips, and chrysanthemums.
We also set a goal to get more crops into this center column. As an example, dahlias were a flower our customers loved but we weren’t very good at growing. We spent time researching this crop by speaking with other farmers, implementing mechanization, and improving our pest management. It was worth spending this time learning the crop because we could sell every stem we could grow. By the end of the season, we were better dahlia farmers and our bottom line was better, too.
Inversely, we worked on marketing crops that we liked growing but weren’t selling well. Daffodils are a great example. Early on in our flower farming journey, we had planted thousands of fancy daffodils, which are an easy and reliable perennial flower. As advised in the farming books, we harvested our daffodils in tightly closed bud form for the longest vase life. And we sold very few.
Customers just weren’t drawn to the closed flowers, and they thought daffodils sounded too boring. The next year, we tried selling them at our markets at a more open stage, so that customers could see how interesting the varieties were. We also scrapped the word “daffodil,” instead rebranding them as “heirloom narcissus.” Many customers remarked that they had never heard of this exotic flower, which they bought up by the armful. In 2023, daffodils ended up being one of our highest grossing flowers.
Some flowers we liked growing but needed rebranding –like daffodils, which started selling better at a more open bloom stage, and rebranded as “heirloom narcissus.”
We also realized that a lot of crops did not land on our Venn diagram at all; they were not particularly popular with customers, and we weren’t good at growing them. For us, these included many summer annuals like gomphrena and ageratum, as well as gladiolus, which our customers said reminded them of funerals and always ended up infested with thrips. We dropped all of these crops.
Improved our records
I have never been a great record keeper, but adding a few simple records into our daily habits have been essential to becoming profitable. First, we started keeping a basic field map with the dates we seeded, the dates we transplanted, and the dates we began harvesting each crop, plus any notes. This has given us a much better understanding of our crop timing and successions.
Next, we began keeping a daily harvest log. Our harvest log is a simple Google Form that everyone on the farm can access. To make completing it easy, the form is pre-populated with what’s currently in bloom. I update it every few months to stay current. Whoever puts flower buckets into the cooler is responsible for recording the number of bunches harvested.
The form feeds into a spreadsheet where we can see exactly what was harvested when. This helps us see where our gaps in production are and better understand yields from our flowers. We can also compare it to our sales records to see how well certain crops are selling. Getting everyone to use the log took a few weeks, but it has now become an easy habitual task.
Finally, and perhaps most importantly, we have improved keeping records of labor and time. While my husband and I didn’t used to track our own time, we have started clocking in right alongside our crew, an idea we got from Michelle at Roots Flower Farm. This gives us a better idea of how many hours we’re actually spending on the farm each week (a lot more than we expected).
We’ve also been recording how long certain tasks take to better understand our crops’ costs. On our Harvest Log form, there is an optional line to add the number of hours spent harvesting. We ask our crew to complete this line a few times during the course of each crop’s season, so that we can get a sense of the average hours spent harvesting different crops.
We’ve also been taking notes around key tasks, such as how long we spent planting dahlias (72 hours last year) or how long it takes us to water the lilies (around 80 minutes when the greenhouse is full). All of this labor data comes together with our enhanced expense categorization to give us a key metric: our costs to grow our most important crops.
Adjusted our prices
In discussions among flower farmers, pricing is a popular topic of conversation. Common advice is to check the USDA’s report on Boston Ornamental Terminal prices or make an account with a local floral wholesaler to see what they’re charging. The problem with using these prices as a guide is that they’re based mostly on imported flowers, often grown at massive scale, using questionable labor practices, and usually with systemic pesticides. All of this is pretty irrelevant to my own farm.
After tracking our labor, expenses, and supplies, I learned that our direct costs to grow a tulip in January are around 78 cents, not including our farm’s overhead costs like insurance and depreciation. Meanwhile, tulips at my local wholesaler are currently $6.50 per 10-stem bunch. If I based my pricing on that, we’d be quickly out of business.
A simple formula that is working well for our retail-focused farm is to multiply our cost to grow by three. This accounts for overhead and loss, while still leaving room to bring home a profit. For retail, we then add sales tax and round up to the nearest number. Of course, pricing as the market will bear is an important part of the equation.
Rather than actually raise prices, we have made our bunches and bouquets slightly smaller. Our tulips last year were $20 per eight-stem bunch, and this year we’ve reduced the bunch size to seven stems after determining our costs. No one has complained or even seemed to notice, and our revenue is way up. According to my daily check in, up nearly 40 percent from this time last year.
Rebecca Kutzer-Rice owns Moonshot Farm, a specialty cut flower farm in East Windsor, NJ. She grows flowers year-round including in a geothermal greenhouse, for retail markets in and around NYC.
