1. The Cost of Poor Financials
Presented by:
Julia Shanks, Julia Shanks Food Consulting
Ted LeBow, Kitchen Table Consultants

2. Agenda for Today... Introductions Goals of Technical Assistance
Overview of the Cost of Poor Financials
Case Studies:
Example of a costly mistake
What was the actual cost?
Tools and resources provided to client to resolve
How do you have these conversations?
TA Tips

3. Compare and contrast businesses, how people come to KTC vs having people assigned as clients

4. © JULIA SHANKS FOOD CONSULTING l WWW.JULIASHANKS.COM

5. Disclaimers
The numbers and examples in this presentation are fictitious and used for illustrative purposes only.
As you work with clients’ businesses, you will need to calculate the financial data based on their specific economic reality.

6. Coach clients to be entrepreneurs, not just farmers.
Today’s Goal
Understand the financial tools available to help farmers better manage their business
Coach clients to be entrepreneurs, not just farmers.
Also discussed as goal 1) give tools/resources needed, 2) learning soft skills for working with farmers

7. Why Bother? If you budget, you can buy (not borrow)
If you want to borrow, you can apply for a loan
You can plan for seasonality
You can file your taxes

8. Underlying Goals of TA Help them understand “why bother?”
Give farmers to knowledge and tools to be better managers
Create tools that they can use when the TA is done
Help them:
Get loans
Avoid a cash crisis that is an inherent risk with a seasonal business
Ensure Farmers are Financially Sustainable

9. The Costs of Poor Financials
Don’t understand costs (and how to price)
Can’t borrow money
Get into a cash crisis, especially in April
Don’t know where to focus growth
Knowing where profitable

11. Don’t understand costs
As reminder to attendees, we will be reviewing each of the Costs of Poor Financials w/ case study example of costly mistake, what was actual cost, tools and resources provided to client to resolve, and how to have these conversations.

12. Cedarhill Farm Selling Piglets for $95 each.
Calculated Cost at $24 based on food, health and bedding for 8 weeks.

13. Cedarhill Cost of Production
COST TO RAISE 200 PIGLETS
Number of Sows 10
Line Item
Cost
Unit
How much per animal
Extended Cost
FEED
$0.23
per pound 6
pounds/day
$5,037.00
HEALTH
$10.00
dollar 1
year
$100.00
BEDDING
$6.00
dollars
week
$3,120.00
LABOR
$2.00
per day per sow
$7,300.00
SUPPLIES
$0.60
$2,190.00
$17,747.00
Number of Boars 2 5
$839.50
per animal
$20.00
$0.50
per day
day
$365.00
$1,224.50
Total Cost
$18,971.50
Per Piglet
$94.86
Raise the Piglet to 8 weeks
$24.00
$118.86

14. Resource: Cost of Production
Align misaligned costs
Buy feed by the pound—allocate to a pig
10 sows + 2 boars yields 200 piglets—allocate to a pig
Labor is by day—allocate to a pig
Everyone thinks about numbers differently
How does your client think about it?

15. 2. Can’t borrow money
Ted does Theory section

16. Sunny Daze Farm
Didn’t know if they could afford to pay back a loan

17. Tools: Sample Chart of Accounts
Organize Expenses to Business Reality (not the Schedule F)
Direct Operating (Cost of Production)
Labor/Payroll
Occupancy
General & Admin
Repairs & Maintenance
Adjustments to COA effect all historical transactions
Create projections based on historical revenue and expenses

18. The Schedule F- Income Statement

19. Challenge #1
Grants are included in Revenue

20. Challenge #2 Expenses aligned to Schedule F, not business reality
Payroll? Property? Income?
Liability? Vehicle? Employees?
Direct Cost of Animals
Expenses aligned to Schedule F, not business reality

21. Tool: Sensitivity Analysis
Generic Workbook: sensitivity analysis
Sensitivity Analysis:
AKA: a spreadsheet that is formula driven.
Isolate the input (decision) variables and highlight the output variable so you can see the impact of changes
© JULIA SHANKS FOOD CONSULTING l

22. 3. Get into a cash crisis

23. Edgeway Farm Didn’t understand debt
High interest payments, can’t grow because overwhelmed by debt

24. Tool: Cash Flow Projections
Quick & Dirty Cash Flow month view
13 Week Rolling Cash Flow
useful for triage and seeing monthly cash flow
Weekly Cash-Call
Just refer back to Quick and Dirty Cash Flow as discussed with S-D farm.

25. Don’t know where to
focus growth

26. Wynnfield Farm Raising chickens, layers, and veggies
Think back to Cedarhill Farm. They were also thinking of growth, and had they grown their piglet business they would have driven themselves into the ground financially and not known.
Raising chickens, layers, and veggies
Know they need to grow to generate enough revenue, but not sure where to focus resources

27. Tool: Channel profitability analysis
Eggs
Meat Birds
Pork
Veggies
Farm Store
Logging
Cattle
Misc
Overhead
TOTAL REVENUE
21,561
1,060
12,458
102,080
27,452
1,150
1,200
4,484
% of Total Sales
13% 1% 7%
60%
16% 3%
Total Channel Expenses
9,948
502
12,731
16,757
21,888
315 91
70,530
Total Channel Gross Profit
11,613
558
(273)
85,323
5,564
835
4,393
Channel Profit Margin
54%
53%
-2%
84%
20%
73%
98%
Overhead Distributed
6,539
322
2,856
45,623
3,852
6,128
175
492
Channel Profits
5,073
235
(3,128)
39,700
1,712
(5,293)
(175)
3,901
24%
22%
-25%
39% 6%
-460%
-15%
87%
Hourly Profit
$9.12
$8.05
$6.62
$8.56

28. Knowing where you’re profitable

30. Local Food Wholesale Distribution + Market Place + Farm + Buying Club
Dewy Mist Family Farm
Local Food Wholesale Distribution + Market Place + Farm + Buying Club

31. Bright Shiny Objects…
Accountability
Weekly Workbook
Growing organization = more risk
Poor financials drive risk higher.
“What if” scenarios planning
Mitigates risk
Impossible with poor financials
“We don’t care how much profit you make we care you know how you make that profit.” ~Ted LeBow

32. © JULIA SHANKS FOOD CONSULTING l WWW.JULIASHANKS.COM
In summary…
© JULIA SHANKS FOOD CONSULTING l

33. 8 Tips for providing TA
Speak English (or Spanish) and not accountant-ese.
Perfect is the enemy of the good
Acknowledge resistance (and get buy-in)
The question is the answer
Are you questioning their answer or answering their question?
No vision, no change
Define success
Build your team

34. Building Rapport and Trust
Bourbon and F-bombs
Tough love
Understand their limitations
Case by case basis
Establish level of knowledge
Listen, and repeat back “What I’m hearing is…”
Each share opening questions/questions to get to know client’s business

35. THANK YOU! More resources:
Contact:
Julia Shanks | |
Ted LeBow | |