University of Maryland Extension

From Surviving to Thriving: Strategies for Urban Farm Success

Calculating the profit

Urban Ag home | Table of contents When you subtract out variable/operating, fixed/overhead, and depreciation expenses from the income, the result is profit. With the profit, you can pay yourself (If you haven’t already expensed a salary for yourself), grow the business, and pay down debt principal...

Depreciation

Urban Ag home | Table of contents Producing crops and livestock often requires machinery, structures, and other capital items which add to the expenses of the farm. Since these items last for several years, you do not subtract the entire cost for use of equipment and structures in the year they are...

Fixed/Overhead expenses

Urban Ag home | Table of contents You incur some fixed/overhead expenses that are not directly associated with the amount of agricultural products you produce. For example, expenses like property taxes, insurance, loan interest, utilities, and office supplies do not vary with the amount of crops...

Variable/Operating expenses

Urban Ag home | Table of contents Variable/Operating expenses are directly tied to producing crops and livestock and usually increase or decrease proportionately to the increase or decrease in production. For example, if you decide to produce more crops, you will need to purchase more seed,...

Calculating expenses

Urban Ag home | Table of contents The other factor that affects profit goals is expenses. As mentioned before, expenses are associated with the inputs required for producing agricultural products. Income minus expenses equals profit. Expenses can be described in different ways but here we will...

Setting income goals

Urban Ag home | Table of contents Income is dependent on the amount of each agricultural product that you plan to produce and sell, as well as the market price for those products. So as you plan production and marketing you should also be setting your income goals. A good systemized approach for...

Setting profit goals

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...

What about not-for-profits?

Urban Ag home | Table of contents Not-for-profit organizations need to understand their finances just as much as for-profit businesses do. Not-for-profit organizations do make profits (or positive net income). The difference is that not-for-profit organizations do not distribute profit to the...

What is profit?

Urban Ag home | Table of contents Profit is the calculation of income minus expenses. Urban farms produce crops, livestock, and other products for sale which generates income. To produce these products, inputs are required such as seed, compost, feed, labor, machinery, structures, etc. Subtracting...

Chapter 2: Economic assessment and risk management

Urban Ag home | Table of contents Dale M. Johnson Extension Specialist, Farm Management University of Maryland Extension Most of the work of a farm is in producing and marketing crops and livestock. But will this effort be economically viable? And what are the economic risks? These are questions...

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