Like I said in an earlier post, this report is a direct response to a question sent in by a visitor from India, through my Cost-Saving Farm Business Ideas website.
It is accessible in full, only by members of my Farm Business Ideas Club, as a PDF download from a members-only area of my SD Nuggets blog here at www.sdacademy.org.
For details of how to gain access to this and many other special PDF reports to follow, that provide experience based and researched answers to questions from real life farm business owners and enthusiasts like you, contact me via tayo at tksola dot com, stating full details of your needs and interests.
What follows is a brief preview of what the full report contains.
Before getting into number crunching, it’s crucial that you ensure you have everything in place to avoid doing your calculations based on inaccurate assumptions or worse, incorrect data!
1. What You Need To Accurately Compute Your Production Costs (A Fundamental Requirement)
In order to do any calculations reliably in business, you need to have a good record keeping system that efficiently captures production as well as financial data for your farm.
Without the above, any efforts you make to calculate costs, revenue or other performance parameters will very likely be a waste of time. Period.
2. A Basic Understanding You Need To Have
Now, before we start discussing the ways you can go about using the accurate and reliable farm data you have, to compute your egg production costs, the (not-so-) small issue of your farm’s uniqueness must be made clear.
Understand that no two production process can ever be identical. There will always be unique peculiarities they have, that will make them vary in performance. That’s where the manager’s ability to manipulate or control the operations taking place in each process plays a determining role.
The foregoing applies to manufacturing just as well as it does to catering, or for our purposes in this report: Poultry Farming Business.
By implication therefore, you cannot draw conclusions about your farm’s cost of egg production by depending on reports or estimates from other people’s farms, even if they operate next door to yours.
This is because it’s highly unlikely they run their farm exactly the same way you run yours. And even if they did, their expenses on supplies and wastes in operation, among other aspects, would be different from yours.
That’s why if you really want to get a firm and accurate grip on computing your Cost of Production in general, and Cost of Egg Production in particular, you need to do a practical collation of all relevant farm records, to arrive at a reliable indicator for your business.
I have had extensive experience deriving costs of production for large manufacturing operations as well as for small and medium entreprises. Most of this came through working closely with highly skilled financial experts as a responsible manager in paid employment(pre 2002), and also in the course of developing custom Excel-VB driven spreadsheet applications for client companies (e.g. Hospitals, hotels and farm businesses) as a self-employed service provider (since January 2002).
What I have learnt is that simple use of spreadsheets can make a world of difference to your ability to capture the most important cost factors relevant to deriving your cost of production.
And that’s why I’m emphasising the above as being crucial to your ability to arrive at the right values for your egg production cost.
At the end of this report, I offer to prepare (for any interested persons) a simple, ready-to-use spreadsheet for quickly and accurately computing your farm’s Cost of Egg production.
3. You May Not Need To Sell At The Same Price As Other Farms!
You’ll need to keep this in mind at all times:
The fact that other farms sell their eggs at X naira or dollars per unit, does not mean it would be PROFITABLE for you to do so too.
You need to first determine what it actually costs YOUR farm to produce one egg.
Then, you’ll be able to intelligently ascertain if the X naira or dollars gives you a margin healthy enough to SUSTAIN your business for the long term.
It is even possible that doing this costing exercise can help you discover that you can SAFELY drop your selling price below X naira or dollars maintained by others, and STILL retain your desired profit margins!
How is this possible you ask?
Well, one explanation is that the others may be running their operations less efficiently.
Maybe they employ poor (or no) process control and regulation, resulting in avoidable material wastes and possibly egg and bird losses etc.
These problems could push up their costs, making them choose to sell at X naira or dollar to earn their desired margins.
Now, if your farm does not have such shortcomings (or if you can eliminate the root causes of those problems in yours), it’s quite likely that you’ll find your derived costs to be significantly lower than what the other farms can achieve.
This will automatically confer a pricing advantage on you, enabling you safely lower your selling price to attract higher sales volume and profits!
The above is one major benefit you stand to gain by knowing how to CORRECTLY calculate your Cost of Egg Production.
Doing so (and you’ll want to do it regularly) puts you in the best position to:
1. Choose the most profitable pricing for your eggs
2. Keep an eye on the trend in your costs, so you can take timely corrective decisions or actions in the event of an unusual change.
The information provided above will guide you to correctly compute your cost of egg production, using the two different methods I now discuss below.
1. A Quick But Less Accurate Calculation method
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END OF PREVIEW
For details of how to gain access to the COMPLETE PDF report, contact me via tayo at tksola dot com, stating full details of your needs and interests.