Sooner or later there comes a time when your hobby or passion of spending endless hours in the nursery, greenhouse, garden, or back 40, grows to the point that you begin to seriously contemplate going into a fulltime or part-time money making venture. Many times it is just a natural progression to take something that you enjoy and have a passion about doing and to expand on it.
Once you make the important decision to market and sell your products, whether it is fulltime, part time, for profit, non-profit, a retail location, at a local flea market, or weekends only, you have planted that important seed and growth process to becoming a business. This changes things dramatically, and all of the sudden a lot of things come into play that never really seemed to matter before when growing was a just an enjoyable hobby or pastime. Now you need to focus on hundreds of details that you never thought of, or really had to pay attention to before.
Just some of the things you should or will be considering, or taking into account will be….
· What licenses or permits will I need?
· Do I need insurance?
· Do I have enough growing space?
· What are my costs to produce the plants or products I am selling?
· Should I sell, wholesale, retail, both?
· Who are the customers I will be trying to attract and sell to?
· Where will I be getting my supplies from?
· How do I establish credit lines with my vendors?
· Will I need to get financing, and how will I get it?
· How much money do I have, how much will I need?
· How do I market my own products?
· How much are my competitors charging, how much should I charge?
· What plants should I sell, should I specialize, should I grow seasonal items?
– Do I grow for the garden market, the grocery market, health food market, should I sell to distributors?
· Where should I advertise, what should my advertising budget be?
· Who are my competitors?
· Do I sell local, regional, national, the internet, or all of the above?
· How do I calculate what my actual costs are?
And the list goes on, and on, and on…..
Unfortunately the space in this article does not allow adequate room to fully discuss even one of these questions let alone covering all of these subjects and more. If you require help with issues such as permits, licenses, collecting taxes, or getting the required insurance, there are a lot of resources and agencies that can help you get going. These items are really the easiest and most straightforward things to take care of when setting up a business.
There are certain key factors to the start and profitability your business that are common with the majority of businesses no matter what products or services they are involved in the business of selling or producing. The key to getting your business off the ground, and the one that seems to be the most overlooked item in a startup, is the creation of a realistic startup operating budget. If you do not have a realistic budget established, how will you ever know how much of you own monetary resources you will need to get your business started and just as importantly continue to fund your daily, weekly, monthly, and quarterly operating expenses? Most shoestring startups avoid this key step of setting up a budget because it is tedious, boring, difficult to understand, and is continually changing based on all kinds of variable factors.
What is important to note is that in your startup phase, you do not have to have an accountant, CPA, or have an expensive software package to get your budget established. Also you do not need to have an exact down to the penny figure on what every little expense will be. You will wind up killing yourself in detail and you will probably never get it finished.
There are hundreds if not thousands of different variations on how someone that is in the green and growing industry may want to start in their new venture. There are so many factors that may vary from location to location, type of marketplace, size of growing facility, funds available, type of plants, produce, seeds, products to be sold, part time venture or full time venture, wholesale versus retail, etc, that there really is no standard budget template or guidelines that can be used for everyone. There are however generic categories that generally are used in a particular industry. You can find resources to help you out in determining what you need in developing your budget. The obvious places are on-line or your local library can be a great help. You can readily set up a budget using a spreadsheet program on your computer, making it a lot easier to automatically calculate totals as well as keeping changes updated.
As mentioned earlier, it is almost impossible to include every possible combination in a budget that would be a template for every grower to use, but we will list some of the many possible items that would need to be included as a general guideline to get you started. If you are just in the planning phases in your business venture, I would suggest actually creating 2 budgets. The two budgets you will need to create would be your startup budget and the second would be your estimated operating budget. The difference between the two is essentially the startup budget will include all the things your business will need before you even open the doors and make your very first sale. The operating budget will be the expenses you will be incurring as you make sales and operate your business. It is important to note that your budget will be driven by what you anticipate that you will need to sell to make a profitable income from your business. For example if you need to sell $500 per month or $5,000 per month in sales will have a direct impact on what your operating budget will be.
Simplified Sample Budgets
|Startup Budget||Operating Budget|
|Description||Cost||Description||Jan||Feb||Mar||Total (1st Qtr)|
|Credit Card Machine||$430||Advertising||$150||$150||$150||$450|
|Startup Total||$8,925||Office Supplies||$140||$140||$140||$420|
There will be quite a few things in the startup of your business venture that you will either need to buy, build, beg, or borrow to allow you to begin selling. Again it is impossible to list in this article all the possible items that could possibly list, but we will give a brief example here to get you started.
To put together a preliminary budget like this should only take a few hours. If you do not have the exact cost for some of the items you have in your budget, just take an educated guess. Remember it is a budget and will more than likely change several times during the course of getting you business started.
One of the very important benefits from going through this exercise is that it will be able to help you determine what volume of sales and possibly what profit margin you will need to charge in order for you to cover all the expenses that are related to your business. For the sake of limited space in this article, let’s focus on the operating budget and we will leave the startup budget for discussion another time.
Taking the monthly expenses in your budget, which is estimated to be approximately $5,000 per month, and we will assume your market will allow you a 40% profit on the plants and products you are planning to sell. This means that for every dollar of your product you sell $0.60 is what it costs you to produce the product and $0.40 on every dollar is what you will be using to help you cover your expenses and hopefully turn a profit. That means that if you sell $100 for the day, $40 will go to covering your expenses. So the first thing you have to do is generate enough sales to cover your costs, which are approximately $5000 per month. Quick math will tell you that in order to break even your monthly sales will have to be at least $12,500. Any additional sales per month above that amount will be profit that you would then be able to use for other aspects of the business.
What this preliminary budgeting really does is give you the insight to help determine the many different aspects and scenarios that you can now develop to help you organize and manage your financials. A couple of quick examples would be, if you were to increase your sales to $10,000 per month. How much profit would you have per month? Will I need to hire more employees? Do I need to increase my prices? Can I reduce my costs? Can my physical space support $10,000 in sales each month?
As you develop your budget, you will find many eye openers that will help you decide on how to successfully get your passion turned into a business. Also keep in mind that if you need to borrow funds from relatives, banks, etc., a budget will become a key component in helping a potential lender or investor make that important decision with you.
Werner Buchholz is a freelance writer who also develops and markets plants grown by micro-propagation, plant tissue culture, as well as carnivorous plants.
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