Turnover vanity profit sanity….what a load of tosh

[Steevo]

id rather have 1m turnover and 300k profit

Obviously. But that wasn't one of the options.

If we're adding more options.....£500,000 turnover, £330k profit is better still.

My point being, PROFIT is far more important than TURNOVER.


Yes you need turnover in order to make profit, and you cannot have a profit higher than your turnover......BUT it's easy to have turnover and zero or negative profit.

 

[fgc325j]

Heard this said plenty of times, but really if you have a small farm turning over a relatively small amount say £1-200k you are only ever going to be able to make so much money no matter how efficient you are or how well you sell your produce. The only way to increase profits is to increase revenue and that means turnover. Lots of moaning on here about cost of red tape and lack of government support and the expectation that we should be supported, I agree we should be recompensed for any environmental obligations. We have to accept that cheap food relative to the cost of everything else is important for the world’s people and governments. In order to survive, we need to increase revenue and profit. So what’s your plan?

But - the problem with farming is that there is a limit to how much you can squeeze out of an acre. Either the weather shortens the growing at both ends, or the wrong weather reduces the growth in the season, or , it comes to a point where you cannot put on any more ferteliser ,because it'll either poison the plants/ground, or it's not
cost effective.

 

[Spencer]

Heard this said plenty of times, but really if you have a small farm turning over a relatively small amount say £1-200k you are only ever going to be able to make so much money no matter how efficient you are or how well you sell your produce. The only way to increase profits is to increase revenue and that means turnover. Lots of moaning on here about cost of red tape and lack of government support and the expectation that we should be supported, I agree we should be recompensed for any environmental obligations. We have to accept that cheap food relative to the cost of everything else is important for the world’s people and governments. In order to survive, we need to increase revenue and profit. So what’s your plan?

How much money/profit is enough?

 

[Devil's advocate]

To maintain a decent working profit it used to help buying used machinery at displenishing sales.
And it used to be that to buy decent sized kit it was usually a sale from a farm where they went balls out on 'turnover' and daydreaming, until reality came calling and the money ran out.
Sadly theres more than 2 daydreamers for every lot at a sale theses days, but watching the next generation of kids trying to justify big kit with 'turnover' and paying new money for old rope makes for an interesting days sport, and it only costs the price of a coffee and a bacon roll.

[The real answer is to invest the farming profit 'off farm', as when it rains on the big boys (literally, like this year, or metaphorically) you've got a 2nd income stream that follows a different 'non ag' path, instead of just playing the same hand with a bigger stake, and doubling down on the losses].

I can thank my Mother because she always wanted to invest outside farming.

So I grew up working harder & harder to buy the things I wanted. But now when the chips are down, I've got some very useful income streams & valuable assets. That's in the back ground so all I need to do now is earn a little bit more than I spend.

 

[Jackov Altraids]

Agreed.

The future belongs to the revenue growers, not the cost cutters.

Twas ever thus, but feels especially so at the moment.

Was it the machinery salesman, the agronomist, the bank manager, your buyer or all of them that told you this?

 

[rusty]

About 10 years ago we cut our yield back from 8550 to 7400 litres cow. Managed to rent more land so stocking rate went from 2.9/ha to 2.3/ha. Fertiliser and contractors costs went up but we cut purchased feed by 250k (330 cows). Profit increased significantly.

 

[Wigeon]

Was it the machinery salesman, the agronomist, the bank manager, your buyer or all of them that told you this?

None of them, but it's a fair point.

The thing is, if the pie never gets any bigger, how do you deal with (inevitable) cost inflation? Sure, cut your cloth accordingly, amd obviously be sensible about it, but ultimately we're all knackered without growth the long run.

 

[PI Stsker]

You need one to get the other. Can’t have a good profit with out a good turn over.

 

[capfits]

I give you we work.
Fabulous business model if turnover is yer thing....

 

[Wigeon]

None of them, but it's a fair point.

The thing is, if the pie never gets any bigger, how do you deal with (inevitable) cost inflation? Sure, cut your cloth accordingly, amd obviously be sensible about it, but ultimately we're all knackered without growth the long run.

Was it the machinery salesman, the agronomist, the bank manager, your buyer or all of them that told you this?

I would also specifically say that in an arable context this does not apply to gaining growth by simply taking on more land.

Unless you get it for free and have the machinery and labour capacity to do it, its a dangerous game in my book.

 

[Green oak]

I’d imagine there was quite afew machines brought on good profits. Sadly those deals probably were done over 3-5 years that don’t look so good now.

 

[glasshouse]

Heard this said plenty of times, but really if you have a small farm turning over a relatively small amount say £1-200k you are only ever going to be able to make so much money no matter how efficient you are or how well you sell your produce. The only way to increase profits is to increase revenue and that means turnover. Lots of moaning on here about cost of red tape and lack of government support and the expectation that we should be supported, I agree we should be recompensed for any environmental obligations. We have to accept that cheap food relative to the cost of everything else is important for the world’s people and governments. In order to survive, we need to increase revenue and profit. So what’s your plan?

Just negative talk from negative people who have never taken a risk themselves

 

[DrWazzock]

So what sort of % profit on turnover is considered good? We make about 30%. £30k profit on £100k turnover on average.
We could do better but I admit I’ve wasted money on machinery. I’m trying to rectify that now by cutting machinery fleet to bare minimum. SFI will replace BPS and will continue to be half of the profit. I say average. This past year and coming year will be below average.
As said above by @teslacoils a small farm, however well run is now a nice place to live and a bit of pocket money. We’ve simply been outscaled on all fronts and left behind by the huge disparity between commodity price inflation (or lack of it) and cost of living but we are still in the game, part time. C’est la vie.

 

[DrWazzock]

I really don’t envy those who have massively scaled up TBH. Headless chickens with huge expenses. Don’t know whether they make much.

 

[B R C]

The main point is as @Wigeon has alluded to is that farming output inflation has not kept up with imput or cost of living inflation so profit in real terms has dropped massively, the fact that lots of you are saying new machinery is not affordable demonstrates this perfectly. Just to stand still in real terms you need to get bigger, much bigger, you can only cut costs and streamline the business so much, otherwise we are just going to get poorer and poorer in real terms. Does the government care about food security and farm gate prices, of course not, silly farmers will just keep farming it whatever, cheap food for everyone is more important.

 

[DrWazzock]

The main point is as @Wigeon has alluded to is that farming output inflation has not kept up with imput or cost of living inflation so profit in real terms has dropped massively, the fact that lots of you are saying new machinery is not affordable demonstrates this perfectly. Just to stand still in real terms you need to get bigger, much bigger, you can only cut costs and streamline the business so much, otherwise we are just going to get poorer and poorer in real terms. Does the government care about food security and farm gate prices, of course not, silly farmers will just keep farming it whatever, cheap food for everyone is more important.

Yes you need to get bigger or intensify in some way to increase your absolute profit to keep pace with the rising cost of living. Or alternatively spread your investment outside of agriculture so all your eggs aren’t in one basket. I think that’s actually more sensible. Who’d want to be 100% invested in agriculture in a disastrous farming year? Also there’s very limited opportunity for people to actually get bigger as land is held onto for tax reasons. Diversify your investments in capital and time is the best way IMO. Many farmers bought buy to let’s for this reason.

 

[B R C]

So what sort of % profit on turnover is considered good? We make about 30%. £30k profit on £100k turnover on average.
We could do better but I admit I’ve wasted money on machinery. I’m trying to rectify that now by cutting machinery fleet to bare minimum. SFI will replace BPS and will continue to be half of the profit. I say average. This past year and coming year will be below average.
As said above by @teslacoils a small farm, however well run is now a nice place to live and a bit of pocket money. We’ve simply been outscaled on all fronts and left behind by the huge disparity between commodity price inflation (or lack of it) and cost of living but we are still in the game, part time. C’est la vie.

The government has just increased the vat threshold to £90k so they are expecting tradesmen with a van, a few tools, and a small accountants bill to be earning up to that, small farm profitability just doesn’t stack up the same, nice place to live or not. In the last 15 years my business has changed a lot, not because I particularly wanted it to but I saw it as the way forward(and I get bored easily and like new challenges).

 

[FonterraFarmer]

Heard this said plenty of times, but really if you have a small farm turning over a relatively small amount say £1-200k you are only ever going to be able to make so much money no matter how efficient you are or how well you sell your produce. The only way to increase profits is to increase revenue and that means turnover. Lots of moaning on here about cost of red tape and lack of government support and the expectation that we should be supported, I agree we should be recompensed for any environmental obligations. We have to accept that cheap food relative to the cost of everything else is important for the world’s people and governments. In order to survive, we need to increase revenue and profit. So what’s your plan?

BMC theory, lots of turnover with no profit.
Where are BMC/British Leyland/Rover now???

 

[britt]

It's not the coffee, it's the experience. Ie it's something to do, somewhere to go, sugar rush etc.

There's always a queue at the drive throughs around here. There are folks who believe it's an "essential".

 

[DrWazzock]

I used to farm three farms (2 as a contract farmer) but now farm one ( our own). My profits didn’t really decrease much. I’d been busy wearing out machinery and my family.
Just look at the price of a new combine / telehandler/ 200 hp tractor now. Does expansion really stack up? I don’t think so. The machine on the farm that can now earn (or lose) most now is my phone.
Yeah I get bored easily as well. I got bored with arable farming. Risking £££k for paltry returns busting a gut at all hours for my contract farming clients who did well out of it. New Years Eve lying under the beet harvester changing the knife under moonlight. Mrs sitting at home. No thanks.