University of Maryland Extension

A Booth at the Farmers' Market: Profit or Loss

Author: 
Ginger S. Myers

 

Ag Marketing News Update

Farmers' Markets are an increasingly popular form of direct marketing for both farmers and customers alike.  Farmers' markets differ from other direct marketing operations due to the fact that growers share insurance, advertising, and marketing costs.  Successful farmers' markets can substantially increase the incomes of participating vendors.  Maryland now has farmers’ markets operating in every county of the state and the City of Baltimore.  During 2010, there were more than 6,100 farmers’ markets operating in the United States.

Major advantages to producers who sell at farmers' markets include:

  • Farmers can usually command their best prices at a Farmers’ Market. Studies indicate that farmers’ market vendors receive between 40%-70% more for their products at market than selling them through wholesale outlets.
  • Producers have limited liability for customers, because they are not o
    the farmer's premises
  • Parking space, restrooms, and other facilities are not the farmers' responsibilities.  The facilities are provided by the market
  • Attracting customers is a function of the market and farmers. This marketing technique may be unfamiliar to many farmers, since it is usually unnecessary for them to devise marketing campaigns for their customers.

However, there are also costs associated with participating in a market.  These include: the need for transportation to the market site, sales tables, a cash box or register with change, organic produce and price display signs, various containers, certified scales or other measurement devices, tents, tent weights, tables, and sales people. 

Disadvantages include:

  • Time required to transport and sell at the market takes away from the farm operation
  • Market hours are controlled by the policies set for the farmers' market, which may not be ideal for individual producers.  Also, advertising—or lack of it—is controlled by the market.  Markets that are poorly located may not attract consumers and other vendors may operate in a manner that depresses price

Many market vendors don’t have a good accounting of the true costs of participating in their markets. 

These costs are needed to determine:
[1] The profitability of the market
[2] Amount of product needed to be profitable
[3] Assists with pricing
[4] Assists in appraising the viability of the market
[5] Time management tool for assessing time invested vs. the financial returns

Here’s a sample of a market evaluation and budget.  Farmer Paul sells his USDA processed, farm raised beef at a farmers’ market that is just 6 miles from his farm.  He pays $15 per week for his space at the market and works the booth himself.  The market runs from 8:00 AM to noon.  Farmer Paul calculates he has $300 left from his market day after he deducts his product costs.  Is this correct? 

Let’s look closer at all the numbers that Farmer Paul needs to consider when calculating whether his market day was profitable. 

Costs he needs to consider on a per day basis:

Booth Rental       $15.00
Total Labor (7½ hrs. @ $14/hr)      
Time to pack his coolers(1 hr.) Set-up, work the market, and tear down (6 hrs) time to unpack the coolers when he arrives home  (½ hr) 
  $105.00
Transportation (time and mileage)     $12.00
Other costs      
(Spread over his 20 week market season—table, table covers, tent, coolers, signage ) 
    $15.00
Product Liability Insurance      $15.00
State and County Licenses and Permits (Processing, vending, sampling)      $12.00

 

Total fixed costs per day for Farmer Paul to market at this venue is: $174.00

His profit for the day is really ($300 – $174 in marketing costs) or $126.00


If this figure is not satisfactory for Farmer Paul, he now knows he needs to sell more product since most of his marketing costs are fixed costs and will not change from week to week. 

Farmers’ markets provide excellent venues for developing entrepreneurial marketing skills, providing instant feedback on product variety and presentation, and are a great way to connect directly with customers.  When you take the time to measure your true profitability from a market, you can then implement strategies to improve it.   

 

To print this article (pdf format) click here...

 

 May 17, 2011


 

 

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