1. Ag & Resource Economics
Creating a Budget
Written by
Annette Dunlap, MBA
Extension Associate
Ag & Resource Economics
NC State University

2. The Value-Added & Alternative Agriculture Start-up Toolkit
Program Outline
An Overview of Budgeting
Fixed Expenses
Variable Expenses
Break-even Analysis
Estimating Revenue
Budget Assumptions
Next steps resources
The Value-Added & Alternative Agriculture Start-up Toolkit

3. An Overview of Budgeting
Budgeting is an important piece of the planning process
Budgets give you a numeric picture of your revenues and your expenses
Budgets enable you to make more informed business decisions about your business
The Value-Added & Alternative Agriculture Start-up Toolkit

4. The Value-Added & Alternative Agriculture Start-up Toolkit
Fixed Expenses
Expenses that stay the same, no matter how much activity you have
Examples:
Rent/mortgage payments on land
Equipment payments
Insurance premiums
Salaried employees
The Value-Added & Alternative Agriculture Start-up Toolkit

5. “Variable” Fixed Expenses
Expenses that you will incur, but the amounts vary based on your activities and the time of year
Examples:
Hourly wages
Utilities
Fuel
The Value-Added & Alternative Agriculture Start-up Toolkit

6. The Value-Added & Alternative Agriculture Start-up Toolkit
Variable Expenses
Expenses that differ with the amount of business you conduct or the amount of activity you have
Examples:
Cost of seed or livestock
Cost of fertility method
Choice of feed
Cost of marketing and selling
The Value-Added & Alternative Agriculture Start-up Toolkit

7. The Value-Added & Alternative Agriculture Start-up Toolkit
Break-Even Analysis
The point at which revenues equal costs
Break-even can be computed as break-even based on units and break-even based on sales
The Value-Added & Alternative Agriculture Start-up Toolkit

8. Break-even Equations Break-even based on units: Annual Fixed Cost
[1-(Average per unit VC/Average per unit SP)]
Break-even based on sales:
Average Annual Fixed Cost
(Average per unit SP – Average per unit VC)
VC = variable cost; SP = sales price
The Value-Added & Alternative Agriculture Start-up Toolkit

9. The Value-Added & Alternative Agriculture Start-up Toolkit
Estimating Revenue
Revenue is often estimated based on the best available data. One possible measure of revenue is:
MP = n x q x p
Where MP = total market potential; n = the potential number of buyers in the market; p = the average quantity purchased by the buyers; and p = the average price per unit
The Value-Added & Alternative Agriculture Start-up Toolkit

10. The Value-Added & Alternative Agriculture Start-up Toolkit
Budget Assumptions
Budgets are snapshots in time – subject to change as we get more information
Reconfigure your budgets as you move forward in your business cycle
The Value-Added & Alternative Agriculture Start-up Toolkit

11. The Value-Added & Alternative Agriculture Start-up Toolkit
Resources
For another discussion on the use of enterprise budgets, visit:
enterprise_budget_analysis.pdf
For a further discussion of break-even analysis, visit:
To gain access to various generic enterprise budgets, visit:
North Carolina-based budgets are available at:
For additional guidelines on budgeting, including a budget for aquaculture, visit:
To access enterprise budgets for other regions of the country, visit:
The Value-Added & Alternative Agriculture Start-up Toolkit