Author Topic: Some Sobering Figures  (Read 1148 times)

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Some Sobering Figures
« Reply #1 on: March 06, 2014, 07:30:09 AM »
Some Sobering Figures
By Herman Beck-Chenoweth

   Farmers and are hard workers, but nobody likes to work for nothing. Unfortunately, farmers are notorious for underpricing their products. It is important to know your costs and your competition, but when it comes to setting prices many people forget that the lower your prices the more work you need to do to make the same amount of money. This is particularly true when you are processing the items you sell. I am not saying donít  ever lower your prices as
there are other factor to take in to consideration.

   Several years ago Walter Carpenter an Extension Agent for New York State put together the accompanying chart that shows the effect of raising or lower your prices.

What Happens When You Raise or Lower Your Prices?

A 3% price cut means you need to sell 13.6% more volume to make the same amount of profit.
5% means you need to sell 25.0%
10% means you need to sell 67.0%
15% means you need to sell 150%
20% means you need to sell 400%

on the other hand...........

A 3% price increase equals the same profit on only 90% of the sales volume
5% equals the same profit on 83.5%
10% equals the same profit on 71.5%
15% equals the same profit on 62.5%
20% equals the same profit on only 55.5%
   You can quickly see, the amount of work you will have to do is very dependant on the price you charge:  T here are many factors you must take into account, of course, when you set your prices: What your competitor is charging for similar products, the demand for your particular product and your production costs, just to name a few.

   But, stop and think. Letís say you are raising and processing poultry. If you reduce your prices just 10% that decision will force you to raise and process 700 additional chickens over the 1000 you raised before just to make the same amount of money. Unless you need the additional manure and fertility for your farm doesnít it seem like a better idea to raise your prices by 10% and only have to produce 715 chickens instead? Even if you are not particularly fond of marketing it seems like a good idea to work a little harder on marketing and save yourself the extra processing and production time.  But again, if you need all that extra manure (and the exercise you get shoveling it) perhaps cutting your price will even save you money over the cost of buying in fertility.

   You can find many good books on all types of farming at www.Back40Books.com on the web. For many in-depth discussions about sustainable farming, green living and other country topics by Herman Beck-Chenoweth visit www.Back40Forums.com  Herman Beck-Chenoweth is the Director of the Research Farm located Natureís Pace Sanctuary near Hartshorn Missouri 65479. ©2014 Herman Beck-Chenoweth.

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