Two Things I Learn (over and over again) From Value-Added Farmer Financials

Every year I dive into sales numbers, cost of goods data, and P&Ls for small value-added farmers who are applying for a Value Added Producer Grant so that I can write the necessary arguments for these one-on-one clients. If you were sitting in the room with me as I do this work you’d miss how exciting it is. All you’d see is a person fiddling with spreadsheets in her lofted office above the kitchen. What’s invisible to the naked eye is that by delving into the numbers I am uncovering information that empowers (hopefully) value-added farmers to make decisions for their businesses. 

Here are two big takeaways I stumble upon every year that I think very well could apply to you. 

#1 Hand-applying your labels is killing your profitability. 

Maybe someday I’ll find a case where this is not true, but so far this seems to be true every time across the board. Hand-applied labels add so much labor cost to your product it is nearly impossible to maintain healthy margins at wholesale and retail margins suffer as well. 

That’s why when I work with client’s through the Profitability Roadmap process we look at packaging costs as they are making design decisions. 

I know how you got here. You have so many different small batch flavors so it doesn’t seem to make sense to buy a large run of labels because what if you don’t make them next year. Plus you want your product to look handmade so that it stands out against a backdrop of processed alternatives. When you said this to the designer you worked with they presented you with design options that had added string embellishments or stamped names or those cute little strip labels that go from the top of the jar to the front. 

If you’re small-scale I strongly encourage you to stick to a simple front and back or wrap label or a pre-printed option. If that means streamlining your flavors to stick within the budget you have to spend on packaging then streamline. You can launch new flavors later when you grow. 

There are plenty of examples out there of labels that can be applied by a label machine that look aesthetically unique and tell the story of the person creating it. 

Here are a few from projects I’ve worked on with my clients.

Stick with labels that support profitability and bring in more handmade elements within your display or marketing material. Tell the story of handmade through photography of you making the product, and through your social content - places where it won’t be impacting your ability to stay in business. 

#2 If you don’t know what sold, you can’t project what will sell. 

It seems harder and harder to get an answer to the question: what did you sell last year? Between square and stripe and quickbooks and your Venmo? At the end of the year, how are you going to know what sold and what didn’t? And if you don’t know that, how can you make informed decisions about where to put your resources (financial and otherwise)? 

If tracking sales is a nightmare of tangled strings then start taking inventory - you can start off by running it just twice a year. Create a simple form where you list every value-added product you sell and note how many are in your possession on the first date and then 6 months later. When you make more of the product add an entry for how many jars or bags you are adding to inventory (+50, for example). 

At the end of the year you can take the starting inventory number, add to that everything with a + next to it to get how many units of product you made throughout the year. If you subtract from that your ending inventory, you can see how many actually sold. 

Where will the time for recording these activities come from? Once you stop hand-applying those labels there will be lots of time for all sorts of things. :)

Cheers,

Ellen