A 5% Increase in Revenue, While Decreasing Costs 5%, Can Have Big Impact on Farm Business Bottom Line

An update yesterday from University of Minnesota Extension stated that, “A single 5% improvement may be easy to overlook, but you should not take this small improvement for granted. Increasing revenue 5% while also decreasing costs 5% can have a big impact on your bottom line.

“The table below compares actual outcomes for the average Southwest Minnesota Farm Business Management Association farm in 2016, to the projected 2017 results for the average association farm if it joins ‘The 5% Club.’ Our analysis of ‘The 5% Club’ compares farm performance if the average association farm improves gross revenues by 5% and lowers operating costs by 5% over 2016 for 2017.

“It is impressive how just these small changes result in Net Farm Income of an average farm more than doubling to $170,000 and Term Debt Repayment Capacity improves from 1.4 in 2016 to 2.4 in 2017. In 2016, the same 5% changes would have almost tripled Net Farm Income for the average farm. Therefore, small changes have a BIG impact on your bottom line. Attention to the correct details can make a real difference.”

Projected Impact of Improved Margin Management; 5% Increase in Revenue & 5% decrease in Costs on the average SWMFBMA Farm (University of Minnesota Extension).

The update added that, “Is it possible to achieve a 5% improvement in gross revenue?┬áProbably. Do a little better than average on selling prices, yields or a little of both. Be willing to sell portions of your production when profitable pricing opportunities are available.”

Is it possible to lower costs by 5%? Probably. Being more effective with expenditures on inputs is one of the real keys. Getting the most revenue possible for each dollar spent on herbicides, pesticides, seed, fertilizer, and feed is very important,” yesterday’s extension item said.

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