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A Profitable Farm Business is a Sustainable Farm Business - Part 1
1.1k Plays3 years ago
In this episode, we sit down with Tom Bennett of Bennett Farms (MI) to discuss the importance of driving profits to build a sustainable business model. Tom shares why Farm profitability should be the main focus of Farmers looking to scale operations.This is the first episode in a two-part conversation with Tom. Bennett Farms is a pastured-poultry Farm located in Edwardsburg, MI. Tom serves thousands of customers in Michigan, Illinois, and Indiana.
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Transcript
Introduction to The Direct Farm Podcast
00:00:03
Speaker
Welcome to the Direct Farm podcast, the go to resource for farms across the US looking to grow and manage their business. Tune in weekly to hear tips and tactics from our most successful farmers on how to increase sales, access more customers and save time and money. We'll also speak with industry experts, business leaders and partners to share the latest farm business trends selling direct to market.
Tom Bennett's Farming Journey
00:00:27
Speaker
Hey everyone. I just wanted to jump in at the start of the episode here and let you all know that this is actually part one of a two part series with Tom Bennett. The conversation was really great. We just went a little long. So we decided to chop it into two separate parts. So tune back in next week and we will be releasing part two. But without further ado, here's the part one. Welcome to the direct farm podcast. I'm Rory, your host for today's episode. We've got a great conversation for you today with one of our farm advisors, Tom Bennett from Bennett farms located in Michigan. Welcome back, Tom. It's great to have you here again.
00:00:57
Speaker
Yeah, thanks for having me. I know you've been on the podcast quite a few times now, but to start out, could you tell us a little bit about your farm, what you raise, where you're located, and maybe just some of the history of your farm?
00:01:09
Speaker
Yeah. See, we went full-time as in farming in 2018, but we started our farm in 2010, 2012 more as a hobby farm. And then it just evolved to where 2016 we started selling a lot of meats direct to consumer. And then 2018, it became a full-time thing. Would you pasture raise pork, chicken and Turkey and.
00:01:28
Speaker
It's all non-GMO antibiotic free. We do farmer's markets and online sales primarily. Yeah. That's where we're at now. And I know you, you might've talked about this on the podcast before, but could you talk about why you decided to choose pork and poultry specifically? Like what made you, you were coming into this without much of a fondant background. What made you keep those products?
00:01:48
Speaker
You start making money as quickly as possible. So the turnaround time on chicken and pork is pretty fast relative to beef and it takes a lot less land as far as with pork and chicken, we're doing rotational.
00:02:00
Speaker
grazing methods. So we're moving the pigs every two weeks, chickens every day. And so on a smaller land base, you can do a lot more pounds of meat by doing pork and chicken and beef. We still want to get into beef someday, but it's such a long game. If you're wanting to get into like breeding up your own herd and every, it could be five years before I consistently had enough beef to supply my customers. So we're going to start dabbling in it pretty soon, but just as a adding some stocker calves when we can.
00:02:27
Speaker
But it's yeah, that's beef's a big boy game. So we'll get there someday. But yeah, pork and chickens kept us super busy. That's all we sell.
Balancing Sustainability and Profitability
00:02:34
Speaker
So kind of the topic for today's podcast that I wanted to dive in with you, it actually kind of originated from a connect session that you were hosting a few weeks back. And for those that don't know, connect is just weekly. They happen twice a week. They're open kind of Q and A sessions for farmers to attend. They're free where you can go in and talk to our farm advisors like Tom.
00:02:52
Speaker
And in that virtual call that you were last hosting, like the sustainability of a farm business was like the central topic, I would say to that call, that people were asking you questions about and that you were speaking. And I think a lot of times when we think of sustainability around farms, we think of how you're raising products, how you're in your land. But in this context, it was a little different. Could you maybe explain what you meant by the sustainability side of farm business? Yeah, in farming, we all love the part of planting the dirt and the husbandry of the animals.
00:03:22
Speaker
I think that some farms forget or don't put enough emphasis in making sure that they're profitably sustainable from an economic standpoint. You can be doing the best practices in the world as far as regenerative, organic and all these things. But if your farm doesn't last because you're not making money and you're not profitable, you're not doing any good. In order to do good, you need to be profitable and sustainable that way as well. And so I'm always telling farmers when I'm talking to them,
00:03:52
Speaker
Like, for every book that you read about agriculture, you need to read a book about business or a book about sales. Maybe even read two books about business and sales for every one that you read about agriculture because, you know, your chickens, your pigs, anybody can raise a chicken or a pig. It's not that hard once you figure out the few basic things you gotta learn to do that. The animals want to stay alive, so they're gonna help you out, but the only way your farm can stay alive as a business
00:04:20
Speaker
is on you, no one's gonna help you but you. You really gotta focus on that more than I think a lot of people realize that they're gonna have to focus on it or wanna focus on it. And so yeah, I'm always preaching that as far as that goes.
Learning and Time Management for Farmers
00:04:35
Speaker
I don't have a lot of time to read books per se, like as far as physical reading, like I don't have time for that, but I do have a lot of time when I'm doing deliveries or on the road driving, I drive a lot. So I have a subscription to Audible and I listen to 100 books a year
00:04:50
Speaker
on audio. And so you can really consume a lot of knowledge that way with an audio book subscription. Even a lot of public libraries nowadays have digital free online subscriptions where you can listen to books. So I highly recommend that if you ever have time where you're not doing anything, turn off the radio. The Christmas music's not going to help you or your business. Just put on something educational that maybe is out of your normal comfort zone and learn something new.
00:05:17
Speaker
So yeah, and I like that you went straight to how you can make that fit in your daily life too, because I think that is oftentimes the next roadblock for folks is I don't have time to read or I don't have time to do these things. But if you're making deliveries, if you're having to.
00:05:31
Speaker
drive a tractor, just do chores. You can throw the headphones in and maybe learn something. So why have you always prioritized this business side of your farm? It sounds like even when you were choosing pork and poultry that you were thinking, okay, I want products that I'm going to be able to turn around relatively quick and can utilize my land to the best or most efficiently. Why is this something you've always made a priority?
00:05:54
Speaker
Because my time is the most valuable thing that I have, we go out and we make money so we can spend money to buy more time back. We spend money on things that make our life easier so we can get more time. So I want to make sure that when I'm wasting my time on something that it's going to be profitable because I walked away from a lucrative off-farm job to do this. And the thing was with the people around me, my family, my immediate family and my household was like, look, I want to farm, but I'm not willing to be poor to farm.
00:06:23
Speaker
I'm not going to make my family go without things because I want to be a pig and chicken farmer. So if I'm going to do this, I need to figure out how to make money doing it as much money as I was making.
00:06:35
Speaker
with my time working for someone else or more ideally. So that's where I came. I came into this knowing that I had to make money. And it's not always all about some people think money's evil and whatnot, but it's necessary. Like you've got to have money to stay in this thing. And I look at money as a way of keeping score. Like your business is a game. It's a long-term game. And the way to keep score is with dollars. If you're up or you're down or you're winning or you're losing by
00:07:03
Speaker
how well you're financially doing. When I'm chasing targets in sales, it's not even as much for the money or if we have a really good week in sales. I'm not excited because of the thousands of dollars that I have come in. I'm excited because it shows that our business did well that week. That's what excites me is to see
00:07:25
Speaker
our sales grow. It's really, it's not about the money. It's about providing more high quality food to more people, but the money just tells me that we're doing a good job. I guess that's a way to put it. Yeah. It's like your, it's, that's your benchmark. That's how we keep score. Yep. And so it's, I can compare it versus last year, how are we doing? And it's a, it's really the only metric you have to keep score.
00:07:46
Speaker
on how you're doing.
Financial Strategies and Pitfalls in Farming
00:07:47
Speaker
Yeah. And I think, and this was something you talked a little bit about in that Connect call, but that, do you feel like this is something that kind of oftentimes gets pushed a little bit to the back burner for farms in terms of making this priority for focusing on having a sustainable business? Yeah, unfortunately it is. I think a lot of people just accept the notion that we're going to have to work for free for years. I see so many farms that aren't paying themselves.
00:08:14
Speaker
And they're working for free. I'm probably one of the very few handful of people at a farmer's market that actually is earning like a full-time income from doing that or giving myself a salary. So many of them are just wasting their weekends at farmer's markets, not paying themselves, putting it all back into the fandom. Psychologically, they're like, okay, we're building, and maybe you'll have to do that in the first six months or maybe while you're a hobby farm.
00:08:38
Speaker
Once you get serious about it, you've got to start making money or you've got to fix something. If you're not making money, if you can't take a salary from it, then you're working for free and something's broken. If you are a beginning farmer and you just bought a new Kubota tractor and a utility side by side, you are wrong. I still don't have that stuff because I don't need it. Only spend money on things that are going to make you more money.
00:09:04
Speaker
Okay, so I've got a Ford 8N tractor that costs about $1,500. It does everything I need it to do. When it breaks, I go buy another one for $1,500. I've got a line of them. I don't even bother to fix them because they're so cheap to buy. It's not even worth fixing. So why would you buy a side by side for $25,000 when you can buy a Ford Ranger pickup?
00:09:25
Speaker
for $2,000. There's things that you need to be smart with your money and not get too far over leveraged in debt. I think with our farm, I was conscious of that in the beginning. And I think the most debt we ever had at any given time on our farm was about $60,000, which to start our business, to grow our business, everything we've done, because we cash flow most things. So it's month to month cash flow is what keeps us going. So we don't have to take out any big loans or things like that. But there's some people, that's one Kubota tractor can be 60 grand.
00:09:55
Speaker
So I looked at it like that. Like when I had $60,000 in debt in different areas, when I started at the farm overall, I had building and walk-in freezer. And I had these things that I just couldn't pay for out of pocket that day. You know, I feel anxious about it, but then I'm like, wait a minute. That's like, that's one tractor. I just built like the time we're almost doing a half million dollars a year in sales. And it only took me.
00:10:18
Speaker
60 grand in startup costs to do that. Well, that's not that bad when you look at it in the big scheme of things, but stay away from that stuff. One of the things that really helped us is a book called Profits First by Mike Michalowicz. It's a cheesy marketing book. The first few chapters, you're like, oh, this is one of those loud guys. But it does have some really good stuff in it. And we implemented that system a couple of years into our farming.
00:10:44
Speaker
and it changed everything. We went from worrying about finances all the time to not having to worry about finances anymore just by, you'll see what I mean once you start listening to it by the time you get to chapter four and five, but that's worth its time taking a listen to. I was curious too, I think you made a really good point there, spending money on things that make you money. What are some other examples maybe for folks that in ways that you've applied that philosophy to your farm? I know you mentioned tractor and stuff there, but what are some other things like that?
00:11:13
Speaker
We spend money when we have to on things like delivery vehicles, on things like we're looking at buying some chicken tractors that next this coming season to get away from the ones, the smaller ones that we're using because we did 6,000 birds this year. We're going to do 10,000 birds next year. So we're looking at some chicken tractors that are much larger. They're expensive though. They're $24,000 a piece, but they're solar powered. They're automated. So there's a lot of savings we're going to have in, uh,
00:11:44
Speaker
and labor and, and death loss of chickens because they're much more effective. So we'll spend money on stuff like that. It's trying to make it a game of trying to see how long you can hold onto your money. You know what I mean? Just keep it as long. Buy things that are only necessary.
00:12:00
Speaker
or that you can utilize to generate more income. Yeah, I guess this kind of plays into that in terms of only spending things that you need to. But as your farm grows, as you look to add new delivery routes or new products, I know you mentioned you guys might start to look into beef in the future. How do you apply this same
00:12:20
Speaker
business sustainability perspective as you look to make those decisions. What is even some of the pre-work you can do to figure out is this next venture that we want to add or this thing we want to include in our business, is it viable? What are some of the kind of steps you do beforehand to look into that?
00:12:36
Speaker
I look it up, it's all done in the office as far as on paper. Right now I've got wholesale accounts emailing me weekly like wanting products from us and I've been turning them down because it doesn't pencil out. If we can sell it, if we're selling everything we can produce as fast as we can produce it retail, why would I want to sell a hundred pounds of bacon to a
00:12:55
Speaker
another online retailer, wholesale, where I'm not making nearly as much money. And so just as you look to add things, make sure that financially you're not just growing for the sake of growing. It's not about how much money you make, it's about how much money you keep. So keep an eye on that. Yeah, we still, we got a lot of room we can grow in wholesale, but we can't really
00:13:19
Speaker
grow there until we have excess product that we don't need for retail. On farmers markets, when we look at adding a new farmers market, we know how much that market needs to do in sales on a daily basis in order to support the wages of the worker that we're sending there, fuel, all these costs that we have associated. So if that market's not performing to making the farm money,
00:13:40
Speaker
then we'll cut it at some point. We'll usually stick out the season just to see if we can build some customer base, but if not, there's always more markets that are better. Don't go down with the ship. There's lost opportunity costs, especially if you don't have 13 part-time people like we do. You might only be you and your husband, your significant other, and you guys can only do two markets a week. Make sure you're doing the best two markets that you can. And if you have to drive two hours to a farmer's market, you can do a farmer's market in your hometown
00:14:10
Speaker
and maybe sell $700 worth of stuff. Or you can drive almost two hours to a major metropolitan area and do $4,000 to $5,000 in sales in the same amount of time of that day. You're like, I'm not driving two hours. He ain't going to drive four hours round trip extra for an extra $4,000. That doesn't make sense. So sometimes it's worth it to get in your car and drive to that major city that's got 7 million people in it.
00:14:34
Speaker
Traditionally, historically, the outlying country areas have always fed the big city, so they don't produce any of their own food. Everything that's ate in that city is brought in, so you're just...
00:14:45
Speaker
Continuing a time honored tradition of the rural folks feeding the cities and taking their money back out of town with us. Yeah. That's actually something I've heard you mentioned a few times, because I know you drive a pretty long ways for your processing as well. Could you maybe explain like you're thinking behind that and how that also plays into how you want to run a sustainable business?
Cost Management and Pricing Strategies
00:15:06
Speaker
Yeah, so our processor's a little further away than we'd like, just from a local carbon footprint standpoint, but the processor that we had in Michigan that was USDA for poultry, this is poultry only, our pork is still here in Michigan.
00:15:20
Speaker
but they were crazy expensive. It was almost like if I was getting a bird cut up, if I was getting a whole bird processed, it was $6.50 a bird, okay? And that's just a whole bird. That's your basic, just slark. And then if I'm getting it cut up and things like that and the drumsticks dies, it was getting up into the $12, $13 per bird range. That was...
00:15:41
Speaker
crazy. And we're not even talking like bone skinless or any value added products or anything like that. They didn't even offer ground chicken. So we finally found a processor that we'd heard good things about in Ohio. It's three and a half hours each way, but our processing cost is like a fourth.
00:15:58
Speaker
of what it used to be. It's at least a half to a fourth. It's probably a fourth. So we're saving like $20,000 a year just on chicken processing by driving three and a half hours every 21 days, eight times a year. Awesome. That's $20,000 worth of free money because our other processor was an hour away anyway. So this is only adding five hours of driving times four. It's 40 hours, 40 hours for $20,000.
00:16:23
Speaker
Yeah. And we didn't drop our chicken prices because our customers were already used to them being what they were before we switched processors. So we just, it kept us from having to raise our chicken prices and we probably won't have to raise them for quite a while because of that. But we're able to just keep all that extra money down. So, you know, that we've made an extra 20 grand this year just by finding a better processor and they do a better job. It's Kings and Sons Poultry in Ohio. And actually processed chicken from people as far away as North Carolina, Kentucky.
00:16:53
Speaker
Like I see license plates from all over the East coast in their parking lot in the morning. They do, they can do up to 900 birds an hour. I can't say enough great things about them and they do a good job. So if you're within six hours of them and you're doing, you need to do big batches. That's another thing. Like you can become more.
00:17:11
Speaker
more profitable by why would you do 10 batches of 200 birds, like over the course of a week. If you're doing that, build more chicken tractors and do two batches of, what would that be? Two batches of 500 or two batches of a thousand, whatever, do less batches of birds, do more in a batch instead of spreading it out. That's a lot less trips to the processor, a lot less trips to the feed mill. Your costs are going to be higher for those two times, but
00:17:39
Speaker
You know, cause you don't want to drive to Ohio to have your chickens processed. If you've only got a hundred birds. In fact, if it's under 200, there's an additional hundred dollar line fee just to stop and start the line for your birds. So you want to do as many as you can at once. And that's another thing. Like we bought chicken crates because of this going to Ohio thing. I had to spend five, $6,000 on chicken crates last year.
00:18:00
Speaker
I would have loved to have rented chicken crates from someone around me, share them with another farmer, but nobody had that. So when I spent all this money on chicken crates, I became the guy that now rents chicken crates to other farmers. I got other farms in my area that do what I do. They even, some of them go to the same processor and I ran out my chicken crates for 250 a piece for the day or two days, whatever long, but they just get on the schedule, make sure it's not when I'm using them. But those chicken crates, after I ran them out 30 times, they were free. So you can do little things like that.
00:18:30
Speaker
Yeah, that's genius finding ways to make the money back on it as well. There's no reason to leave them sitting on the farm for 300 days a year. Yeah. I think something, Tom, that you're always so good at, and I'm always really impressed by it is just how well you know all your numbers too. And being able to have that information, you just have it like in your brain.
00:18:49
Speaker
ready to go, but I was wondering if you could maybe just to talk about the importance of knowing that and the importance of that for all your numbers, for all your products, all your kind of different inputs. Why is that important to you? How can other farms work on that or improve that? And maybe what are the first steps in figuring out all those numbers for your different products and costs and things like that? I just, I'm the one that paid the bill. I pay the bills around here. So like, I know when that feed got delivered this morning, I just had seven tons of feed dropped off like an hour ago.
00:19:19
Speaker
And I'm looking at the feed bill, calculating it, seeing if I'm paying less or more than I did last week. So I'm watching what my feed's doing per pound, the non-GMO feed. So I know all those numbers because I feel that I need to know those numbers, like profitability-wise on pork and chicken. That's what's...
00:19:35
Speaker
The animals are most important. Yes. Okay. We're here for the animals. We want to do a great job, but they've got that. Like we've already taken care of that. We know what we're doing on that. That's pretty much salt. Like we've gotten as good as we're going to get for the most part at raising pigs and chickens on pasture. So now you've got all this, now you need to focus on your business. And if there's any question that you can ever think to ask yourself that you don't know the answer to go find the answer. So I work through.
00:20:05
Speaker
All of my costs on things before they are on the ground, before they start becoming raised. Like I'll, I'm getting ready to order all my chicks for next year and do all that scheduling probably today or tomorrow. And I'm going to call several chicks suppliers because I'm not, don't be beholden to one supplier.
00:20:24
Speaker
Like they all are going to sell you the same Cornish Cross chicks. And there's not really a lot of difference in quality from the Cornish Cross. Most of them are coming from commercial hatcheries anyways. So I'll call around to four different hatcheries to line up my 10,000 chicks for next year. And I'll bounce them off each other. Hey, this company's telling me a buck five. I would love to use you guys because I had problems with their shipping before.
00:20:46
Speaker
but I'm not going to switch if there's nothing in it for me. Can you guys do a buck even? And they're like, let me check. And then they'll get back to me and it's like, boom, I just saved a thousand bucks by asking for four cents off a chick or whatever it is. The math on that is probably wrong, but I see 10,000 times 10,000 times maybe five cents a chick, 500 bucks. So I saved 500 bucks in three minutes just by
00:21:15
Speaker
getting five cents off per chick. So it's things like that. I know them because I have to know them. Like I'm not just the farmer, like I'm the CFO, the CEO, the chief marketing manager, multimedia, Instagram guy. Like I do everything. Yeah. That's why I know it. But.
00:21:32
Speaker
It's important. If you don't know that stuff, like you're going to have problems because you're not going to be able to, when a chef calls you and they're like, Hey, I want to get pork belly. What can I get it for? And you're going to be so excited to get like new business. You're going to sell yourself short and actually sell it for less than it's costing you to produce it just because you're so excited to get into that restaurant. Like it's to where I know if they call me, I know right now what I have to sell pork belly for by the pound for me to make money on it.
00:21:59
Speaker
and be worth delivering. And I actually have a sheet for that. I work through an entire price list of everything we sell from back right here next to my desk. And how often are you updating that? A couple times a year. Sometimes I'll normally in January, I'll go through raise all my prices by 15 cents, 10 cents, just something that people won't even hardly notice. And you'd be surprised with as much meat as we sell. If you just add a dime per pound to everything across the board, like flat, like that can be
00:22:28
Speaker
many thousands of dollars in additional profit. January typically, but if I run into something like middle of the year where our butcher change costs on like making links or something like that for our pork brats and they just bumped it up 25 cents, then I'll go in there and I'll bump it up 35 cents like today. I won't wait on that, but just maybe a couple of times a year, I'll take a look at it.
00:22:48
Speaker
Yeah. For somebody who was listening to this and they're like, Oh man, I don't know these numbers. I haven't done the math on all this. What's, how do you go through? Like what's your process? Do you just look at every single input that's going into raising a complete chicken that's ready to be sold? Yeah. Yeah. Yeah. You have numbers on all that stuff. So I know like on chicken.
00:23:08
Speaker
I'm paying, and I did this a couple years ago when I was first getting all these numbers back in 2018, I actually, with a pig, for example, I'd sent, I had one pig, I told my butcher, don't mix this up with other pigs. I need to do, I need to lay this pig out every single package on the table. This is an average representation of normal pigs and assign values to each product.
00:23:31
Speaker
to get all the pieces on the table to equal $1,100 or $1,200, whatever my margin was that I wanted to make on a hog. So then I could be like, bacon's worth a little more. So I'll make that this, but these hogs are worth less. But then to get to this amount, that's how I assigned everything of value. It might take you an hour and a half.
00:23:49
Speaker
You just got to do that once. Once you do that once, you know the proportion, you have a starting point. As far as cost to go, yeah, we know it takes 880 pounds of non-GMO feed to raise a pig from a 50 pound feeder to a 285 pound market weight pig. It's just about what it always is going to be, about 850.
00:24:07
Speaker
bounce somewhere in their 850 to 880. So then we calculate that by our feed cost. We know what that is. We know how much a feeder piglet cost us. We got straw a few times a year. We've got, we're going to lose a certain amount of our pigs when they're piglets. So we, we worked that in. We got all these things. And so that's how we.
00:24:29
Speaker
just sit down with a piece of paper and go through the life cycle of your animal and think about every cost that you're going to incur along the way. Now I don't include, so on a pig, for example, when we sell a whole pig retail, like in cuts, Susan buys a pork chop, Jake buys a bacon, whatever, we sell a whole pig, we're going to collect about 11 to $1,200 on that pig in general. And I know that it costs me 450 to raise it, that 450, that's my input cost for feed, butchering,
00:24:58
Speaker
and the feeder piglet, like the baby piglets cost. That's not including like labor. It's not including farm insurance. It's not including fuel to the butcher. All that other stuff is paid for with the other $750 profit on that pig. So I know my cost to do the piglet was and my cost to sell it, my cost to pay my employees. That's all coming out of that 750 after the cost. Yeah.
00:25:23
Speaker
No, I think there's always more that plays into that than maybe people realize. And even knowing those additional costs, I think how you have that broken out, these are the direct costs, the direct inputs of bringing a hog from a feeder piglet to at your farmer's market table, knowing those and then keeping those separate then maybe from all those kind of
00:25:43
Speaker
those constant costs with, like you said, labor and things like that. But still being aware that those are a factor, you want that to play in to make sure once those costs are applied as well, are you still profitable? Part of it too. Hey everyone, I just wanted to jump in at the end again and remind you that this is part one of our interview with Tom. So we'll be continuing the conversation next week. So make sure to tune back in for part two. Thanks.
00:26:05
Speaker
I want to extend my thanks to Tom for joining us on this week's podcast episode. Here at Barnadore, we're humbled to support thousands of farms across the country, including Bennett Farms. If you would like to connect with Tom and other farm advisors, you can attend those Barnadore Connect sessions that we mentioned. You can register for those weekly sessions at Barnadore.com. And for more information on Bennett Farms, you can follow them on their Instagram at Bennett Farms, Michigan. Thank you for tuning in. We'll see you next week.
00:26:35
Speaker
Thanks for tuning in. For more free farm resources, tips, and tactics that are most successful farms used to grow and manage their business, visit barnadore.com slash resources. Also don't forget to subscribe to the Direct Farm podcast to automatically download our weekly episodes. Thanks for listening and we'll see you next week.