University of Maryland Extension

Setting profit goals

Dale M. Johnson, Extension Specialist, Farm Management

Urban Ag home | Table of contents

Sometimes farmers focus on production and marketing and at the end of a season hope that there is a sufficient profit. However, good managers will set profit goals right along with production and marketing goals and focus on all three throughout the production season. How much profit do you want to make? Every farm business is different.

For some farm businesses, the owner/operator does not pay themselves a salary during the year as an expense. In this case, the profit must cover the owner/operator’s time and management. Some businesses want to make enough profit so they do not have to borrow money to grow the business – to buy more land, structures, machinery and other capital items. The profit must also cover loan princpal payments which are not expenses. This is further explained in the section on cash flow.

Many small farms, including urban farms, are part time operations. Since the farmer has a full time job elsewhere to support themselves, they may have low expectations for farm profit or for the farm to give them a reasonable wage for their time. But “farming for nothing” soon discourages people.

So considering these and other issues, a farmer should set goals for how much profit they want to make right from the beginning. Then, meeting this goal is dependent on the two factors - income and expenses.

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