The Chicken or the Egg of Budgeting a New Endeavor!
Enterprise Budgets is the fancy title for a new enterprise or endeavor you will start next season. Of course tuning up a budget for next year is easy once you have been through the reality of a season. You can tweak your old numbers based on all the factors and elements you experienced, along with and improvements and changes in scaling up or down for the next season. It matters not if it is livestock, crops or other renewable resources, budgeting helps you have the most success from year to year.
This of course leads to a discussion we were having with some of our fellow homesteaders about new things we all wanted to try for next year. The common issue we were finding was that while there are some really good tools and budgeting spreadsheets for different undertakings, how do you know the best numbers to plug into the formulas? After a season it is easy but before the first one, do you just guess? Well you could do that… but we talked about a few other ways. The best way to get the numbers would be from a neighboring homesteader that was successful in the activity you wanted to start and also knew a lot about your homestead. We all realized this was virtually impossible and so we chatted all evening about the next best possible method. Of course it was fellow homesteaders, but on the Internet. We figured the best way to go was work backwards and find a close match and then just go for it! This method of generating and Enterprise Budget would be the “best guess” based on the two most important elements, your homestead and how you like to run it and your choice of the best match for numbers and budgets that seem to mesh well with your own homestead.
I decided to take some time and do my own research and after reading several articles it came down to some basics, so here you go!
Discovering Excellent Numbers
Among the more common frustrations new homesteaders, farmers and rancher deal with is coming up with trustworthy numbers to make use of in their financial projections. Without a prior history of production where do you get figures and how do you know whether they are credible? Over the last few years there has actually been a surge of enterprise spending and earning plans offered on the internet. Numerous of them include spreadsheet templates that enable you to input your own numbers to obtain a custom enterprise budget for your exact scenario. While the availability of these business budgets is an advantage it is crucial to understand a bit about the information they provide, you need to be aware of their restrictions, and to be able to assess their effectiveness to a specific circumstance.
Exactly what is an Enterprise Budget?
An enterprise budget is simply a detailed accounting of expenses and revenues connected to an earnings center within a business. Enterprise budget plans are essential tools in identifying profitability of individual ventures. For example, if a homestead is producing maple syrup, free-range poultry, Christmas trees, and cut flowers they have four different enterprises which should have separate budgets. In this way you can identify which of these business are most rewarding and which, if any, are not making money. A homesteader may decide after evaluating these budget plans to let go of several of the businesses and focus more time and resources on the more of the profitable endeavors. The point is that the spending plans provide information that can be a good decision-making tool.
Usually, enterprise budgets consist of all the possible sources of income (things that will be sold) and all of the associated costs, both fixed and variable. Some budgets are more comprehensive than others but it is the quality and precision of the numbers instead of the design of the budget that is essential. Search for enterprise budget plans that list the quantities of things sold and used, the rates and costs per pound often change, so the quantities offered and used are really the most important.
Evaluating an Enterprise Budget
Given the variety of business budget plans readily available on the web how can you as a homesteader try a new enterprise, identify which is the ‘best’ one to utilize as a starter spending plan for your very own operation? There are several things to look for that prevail to the finest sample spending plans.
- Is the author and contact details clearly recognized? The majority of reliable business spending plans are established by university researchers dealing with farmers or at farming organizations. It is very important that the authors be recognized and that contact details be offered due to the fact that there are times when you might need to contact them with a certain question.
- Are the assumptions plainly laid out? Every budget plan is developed with a set of running presumptions in mind. Without reviewing these assumptions it will not be possible to understand whether this budget was developed under conditions much like yours.
- Exist notes and guidelines attached? It is the instructions and notes (in addition to the presumptions) that will assist you customize the budget to your circumstance. If the notes are missing out on or unclear you will not wind up with results that you can count upon.
- Is the enterprise carried out in a growing environment just like yours? If you have a spending plan for growing sunflowers that was established in the Pacific Northwest and you live in the northeast you are going to be looking at some modifications. All other things being equivalent, the budget plan developed closest to your growing conditions will yield the best outcomes.
- When was the budget plan prepared? While an older spending plan might still be a beneficial device you need to whenever possible seek the most current budgets that you can discover. Both costs and revenues tend to alter gradually however not necessarily at the exact same rates so you must not try to change an older spending plan by simply enhancing every line by the same element.
Customizing an Enterprise Budget to your Homestead
No matter how carefully an enterprise budget matches your situation there are still likely to be some modifications essential before the budget plan truly represents your enterprise. The first thing you should do is assess the budget plan in terms of the criteria listed in the previous area. Make note of potential issue locations such as, “the budget plan was done for a various growing season”, “the spending plan is 10 years old”, “I’m not sure where the original numbers came from”.
When you have actually chosen that the spending plan deserves customizing you need to do a line-by-line evaluation of the budget. If some of the assumptions are not real for your circumstance then change them first. Be sure to pay specific focus on the main sources of earnings and the costs that are the biggest. Spend your time on the largest products in all categories first since that is where any errors will be most considerable down line. Examine the line products in the variable costs against your other monetary statements or versus the budgets of comparable businesses just to be sure that all major cost classifications are covered. Lastly, go line by line through the budget looking over the numbers and make any adjustments that will bring the budget into alignment with your scenario.
Even after all of this you must be prepared to monitor your budget carefully the very first year and continue to make modifications as you find out brand-new features of your new undertaking. Using enterprise budgets is a wise concept in the development of a business plan. There are many existing budgets for a range of enterprises and it is likely that you will discover budgets that could supply you an excellent place to start. Just be sure you do not simply drop an enterprise budget into your homestead strategy without making a cautious assessment of how precisely the budget matches your scenario.
Where to Discover Business Budgets
By now you know we here at HomesteadWorld.com really appreciate all the good work our County, State and University Extension Offices do and the information they can provide. Many of you homesteaders have similar organizations in your areas to draw upon. One advantage a local source of information has, is that it contains numbers and facts more closely related to your actual homestead.
Here are some of the verified links as of this posting:
Iowa State http://www.extension.iastate.edu/agdm/cdother.html (opens new window) and http://www.extension.iastate.edu/agdm/decisionaids.html (opens new window)
South Dakota State University http://igrow.org/livestock/ (opens new window) and http://igrow.org/agronomy/ (opens new window)
UW-Madison Wisconsin http://www.cias.wisc.edu/category/enterprise-budgets/ (opens new window)
University of Georgia http://extension.uga.edu/agriculture/ (opens new window)
Oregon State http://arec.oregonstate.edu/oaeb/ (opens new window)
Rutgers New Jersey http://aesop.rutgers.edu/%7Efarmmgmt/ne-budgets/nebudgets.html (opens new window)
North Carolina State University http://www.ces.ncsu.edu/publications-on-field-crops/ (opens new window) and http://growingsmallfarms.ces.ncsu.edu/growingsmallfarms-animallinks/ (opens new window)
Penn State http://extension.psu.edu/business/ag-alternatives/livestock (opens new window) and http://extension.psu.edu/business/ag-alternatives/horticulture (opens new window)
The variety of both livestock and crops is quite large among all the links. You should be able to find what you are looking for. If need be, follow some side links or search for “enterprise budget” or for a specific topic like “goat enterprise budget” or “alfalfa enterprise budget”. Many of these sites already have predictions for next year’s production and also for support crops and materials.
So with a bit of work tracking down a few budget spreadsheets and making some educated guesses, you will end with a first year budget that should help keep you on track and help with your success even during the first year. Consider having some local homesteaders give it a look over too and then go for it!