- Author: Molly Nakahara
70% of all purchases are made with plastic!
Did you know that cash is used at only 25% of point of sale purchases? Predictions are that cash will be used even less as more alternative payment methods become available. Debit and credit cards are used for over 70% of purchases. Customers enjoy the flexibility and ease of using plastic to pay for purchases. And research shows that consumers spend differently with credit cards than they do with cash! "Mental accounting” is the idea that people treat money differently based on a number of factors: where the money came from (salary vs. gift), the size of a transaction, and the form the money is in when a purchase is made. That last one is important – people tend to spend more money paying by card than paying with cash; i.e. when they don't actually see those dollars and cents leaving their hands. You should not use a credit card reader because it is a stealthy way to dupe your customers into purchasing more of your gorgeous veggies. But it is undeniable that accepting cash only sales severely limits the number of potential customers you may have at a farmers' market.
But what about the fees?!
All credit card processing companies do charge a service fee, usually around 2.75%. It may be a good idea to set a minimum for card purchases – $10. You can also feel comfortable passing the processing fee to customers by charging a convenience fee per swipe (consumers do this all of the time- think about the fees for pumping gas or withdrawing money from an ATM.) In my personal experience as a farmers' market vendor, customers often forget to grab their cash or hit the bank before a market and are relieved that they don't have to limit their market purchases. They enthusiastically whip out their plastic and are tickled by the user-friendly technology they get to use. Writing a signature across the screen of a smartphone is fun! Remember: you can always let people know that you prefer cash but having your credit card reader will help you build your customer base and make shopping at your market booth more convenient. It will probably also increase your sales.
How do I get started?
It is very simple to set up and use a smartphone credit card reader. You must have a smartphone that has a data plan (i.e. access to the Internet through a network.) Next step- set up an account with a smartphone credit card reading company. Square Up is the most used card reader available currently, though Intuit and Paypal both have similar products. I recommend Square. It is free, simple, used at many retail locations and customers are familiar with it. Once you have an account set up, you will receive a free credit card reader in the mail.It plugs into the headphone jack of your phone. You will also need to download the free app that accompanies the card reader. If you are feeling intimidated, ask a fellow market vendor for a quick tutorial.
Great sales tracking!
Once you have an account with Square, you can customize your account to track your sales. You can create “items” with specific prices or leave prices blank to fill in at check-out (in the case of items that you sell by weight.) A few quick taps of the finger and instead of a $30 payment without any details, you can record transaction details: 1 bouquet, 3 baskets of berries, and 2 pounds of tomatoes.
Another great tracking and management tool is the ability to set up employee profiles. Your employees can access your square account using a password that you assign. You are able to specify what each employee is able to do; ie accept payments, access sales records, etc.
A few tips
- You will need to update your card reader every year or so to keep up with the changing technology and improvements that Square makes. This is free to do and you will receive a reminder email. You can have as many card readers as you like- always good to have a back-up on hand.
- Square will save the personal information a customer enters to receive a receipt (either as a text message or email.) You can skip the receipt- I remind people that they will see the charge on their credit card or bank statement.
- The money you accept through Square is deposited to your specified bank account the next business day. For weekend farmers markets, this means you won't see the money until Monday. Don't forget to include these sales in your farmers' market accounting.
- Be sure to make a big sign for the farmers' market letting customers know that you accept plastic! Square will provide you with a small window decal, but you need a sign that catches the eye from across the market!
Using this technology is simple and many of you already possess the tools needed (i.e. a smartphone) to offer this simple service to your customers. Get started today!
References:
https://www.javelinstrategy.com/brochure/251
http://elearning2.uniroma1.it/pluginfile.php/101759/mod_resource/content/1/Thaler1999.pdf
- Author: Dan Macon
As I continue to think about the question of scale in sustainable farming and ranching, however, I've begun to see the danger in relying on spreadsheets alone. Spreadsheets can tempt us to omit biology from the equation. Let me explain:
There is an upper limit to what an acre of even the most fertile farmland will produce. Based on the yield estimates supplied by Johnny's Seeds, an acre of sweet corn will produce 14,400 ears of corn. Even charging $1/ear, an acre of sweet corn, obviously, won't support a full-time income for the farmer (which is why most local farmers grow more profitable crops). So let's look at a “sexier” (at least according to food writers) crop like kale! An acre of kale will produce 16,275 pounds of harvested product – that's a lot of kale smoothies! My colleague Jim Muck reports that he charges $2 for a half-pound bundle of kale. At that price, an acre field of kale would generate $65,100 in gross revenue – not bad, right?! But wait – aren't there costs associated with growing that acre of kale? Certainly the farmer must put in considerable labor – which has a cost to it. Then there's water, fertilizer, seed, supplies, fuel, marketing costs, storage costs, insurance, land rent (or a mortgage) – that $65,100 in revenue might be offset by as much as $50,000 to 60,000 in direct and overhead costs. In my world, $5,000 to $15,000 isn't enough income to support my family for a year. In other words, the biological limits of my acre of farmland suggest that I need to operate at a larger scale if I want to make a living.
Perhaps livestock operations are different – let's take a look! In our part of the Sierra foothills, an acre of unirrigated rangeland pasture will, on average, grow enough grass to support five mature ewes for one month (these five ewes will need 12 acres of rangeland to get through the whole year). One acre of irrigated pasture will support my five ewes for six months. If I do everything right in caring for my ewes, these five sheep will give birth to 8-10 lambs. If I finish these lambs and sell them as meat at the farmers market, I'll gross $2,400 to $3,000 – all from my acre of land! Just like my friend the vegetable farmer, however, I'll have expenses – things like processing charges, transportation, insurance, land rent, water, veterinary costs, and supplemental feed costs. My net income – which pays my “salary” – is $300-500 from these 8-10 lambs. Once again, biology suggests that I need to operate at a larger scale.
Spreadsheets make it dangerously easy to manipulate these numbers and projections. If I can boost my projected yield of kale by just five percent, it makes my bottom line look much more attractive! Unfortunately, these biological limits don't allow us to fudge our numbers that much. Size, as it turns out, does matter (at least economically).
Don't get me wrong – I'm not advocating for huge monoculture farms. I do think, however, that the romantic notion of micro-farming (less than 2 acres) – the darling of our local food movement – is not the answer, either. If Auburn (for example) needs 25 pounds of kale per person to satisfy local demand for kale, the community would need to grow just over 22 acres of kale. Would 22 1-acre kale farms (none of which would be paying its owner a living wage) be more sustainable, or would it be better to have one or two kale farms that paid the farmer a reasonable annual salary? In other words, do we want a local food system that requires farmers to subsidize their farms with outside income and/or unpaid labor, or do we want a system that is economically viable for consumer and farmer alike? I worry that we may be creating a farming system that requires its farmers to have another source of income (like an off farm job or a retirement fund) in order to keep farming – such a system means we won't likely see young families able to start farms that will be viable over the long term.
I still use spreadsheets in my ongoing attempts to look at the economics of my business, but I've realized that the allure of adjusting the numbers until the farm looks profitable is dangerous (at least for me). My future spreadsheets will begin with the parameters set by the productivity of my land – there is an upper limit to what my soil can produce. My projections must be anchored in reality – and informed by my experience and the experiences of my fellow farmers and ranchers. My spreadsheets must take biology into account!
- Posted By: Foothill Farming
- Written by: Dan Macon
Small is beautiful, E.F. Schuacher tells us, and Schumacher’s vision of economics at a more human scale certainly resonates with me as a small-scale farmer. From a local food perspective, small farms are held up as a more compassionate, sustainable and responsible alternative to corporate-managed industrialized agriculture. Small, family-owned farms, the theory goes, are more ecologically sensitive than their “industrial” counterparts. As a practitioner of “small” farming, I am philosophically and economically inclined towards this perspective. As someone striving to make my living from small farming, however, I often struggle with the question of scale. Balancing the idealistic goal of staying small with the realistic need to be big enough to earn a living wage is, I think, one of the most critical questions for small farmers.
From a practical standpoint, there are advantages to staying small. On a small farm, the farmer can pay close attention to details that might be lost on a larger operation – details like soil protection and pest detection. Wendell Berry writes that a farm is sized correctly if it can be cared for by the farm family and perhaps by a few seasonal employees. Obviously, this definition means that a right-sized farm will vary depending on the crops produced. For example, our family can properly care for 400 ewes with a minimum of outside help. On the other hand, five or ten acres of vegetables might be the correct size for another operation.
Perhaps by necessity, smaller-scaled farms also have more direct contact with their customers. With fewer units to sell, small farms are driven to maximize their profits per unit, which often means direct marketing. This direct connection means less time between harvest and consumption, which allows small farms to market fresher, better tasting, and more nutritious fruits and vegetables. As a small farmer, I focus more on feeding my neighbors and my community than on the oft-repeated focus on “feeding the world” espoused by the proponents of industrial-scale agriculture.
The romantic notion of making a living from 100 ewes or an acre of mixed vegetables, however, quickly runs up against the realities of scale. Small producers typically have higher unit costs for purchasing supplies, obtaining processing services, transporting products, and other inputs. In some cases, these higher unit costs on the expense side of the ledger partially or totally offset the higher per unit revenues that result from direct marketing. In other words, I receive more per lamb marketed than my large-scale counter parts, but my expenses per lamb are greater as well. Size is related directly to costs. For example, the harvest cost for a lot of 19 lambs is $25 per animal. For 20 lambs, I only pay $20 per animal. A semi load of lambs (400 or so), would cost even less to process. Similarly, a bale of alfalfa costs $14 at our local feed store. If I buy a ton of alfalfa, I save 10 percent. If I purchase a truck and trailer load, the hay costs just $8.50 per bale, and it’s delivered to our place.
Finally, scale matters to customers, too. Buyers like restaurants and retail grocers would generally rather purchase food from a handful of sources rather than from a greater number of small farms. The Farmers Diner, a small New England chain of restaurants committed to buying from local, small-scale producers, can’t afford to pay $7.50 per pound for bacon from a farmer just down the road (the price the farm received for bacon at the farmers’ market). Says Bill McKibben in Eaarth, what Farmers Diner owner Tod Murphy “really requires is not huge commodity producers or small, incredibly wonderful gourmet farms.” Murphy tells McKibben, “What I need are 1950s-size farms” – the mid-sized farms that have disappeared in the last 30 years.
Economically, a farm is “profitable” if its revenue per unit sold is greater than the direct costs of producing each unit. For me, I earn a profit if I can sell my lamb for more than the cost of feed, veterinary care, shearing and processing. Once a farm can sell each unit at a profit, the farm family must determine its total income needs (for things like living expenses, overhead costs, health care, retirement, etc). Is the farm a part-time occupation? Does the family need to derive one or more full-time salaries from the operation? In other words, the farm must operate at a scale that covers its production expenses and its overhead, and that produces a profit for the farm family. While this scale varies by the type of operation and by the farm family’s needs and expectations, it is a question that must be answered correctly for the farm to stay in business.
Our primary activity is the production of grass-fed lamb. We started our business with 27 ewes in 2005. Today (2011) we have approximately 100 ewes. Experience suggests that I could manage 3-4 times as many sheep without a significant increase in labor or land expenses. Economics analysis suggests that 400 ewes would produce enough lambs to generate both a salary for me and a profit for the business. My conclusion is that we are not yet operating at the proper scale, given our goals and financial needs.
While small farms may represent a way to invest labor (instead of or in addition to capital), capital costs take center stage when considering any expansion. The typical return-on-investment analysis is not a sufficient gauge of success on its own. As a small farmer, I don’t have much capital to invest in my operation. I do have my time, knowledge and skills, however. Consequently, I’m far more concerned with how much a specific enterprise or activity will return per hour of my labor. That being said, once I’ve learned the skills necessary for an enterprise, it may make sense to invest enough money to increase the scale of our operation.
Much of the solution lies in making our national food system more equitable to those who produce our food. “We need to be willing to pay our neighbors enough to grow our food that they can make a decent living,” says Bill McKibben (Eaarth, p 178). To be sustainable, agriculture must address three key elements: resource conservation and enhancement, social equity, and economic viability. To ignore any of these three issues is short sited; to ignore economic viability is lethal. A farm that fails economically will ultimately fail to conserve resources and social equity. Ultimately, economic viability requires farms to operate at a scale that provides for profitability.
Posted by Dan Macon, Flying Mule Farm
