Estimate production costs with free online tool

‘Tis the season to reflect backward and plan forward. And that means making a comprehensive examination of business financials. As the adage goes: You can't manage what you don't measure.

To manage for improved profitability and productivity you need to understand your entire greenhouse operation, says Thomas A. Dudek, Senior Extension Horticulture Educator Greenhouse and Nursery Crops from Michigan State University’s Extension (MSUE)-Ottawa County.

Estimating production costs helps identify opportunities for cost savings

With an eye to the entire picture, you can detect trends and inconsistencies. Then, you can determine where to adjust operations and remain competitive.

Measuring your expenses doesn’t have to mean difficult math. MSU Extension has developed a very detailed online spreadsheet tool with formulas built in. You simply download the Excel file and plug in your costs – heating, labor, plant material, overwintering, etc. Then the built-in formulas calculate the measurements you need to analyze and manage.

Using that information you may notice that heating costs are increasing. Maybe you will find that your irrigation system requires repeated repairs and should be replaced. You won’t know what you don’t know until you measure and analyze the results.

The spreadsheet tool can be found about halfway down the page at MSUE’s Budgets, Cost of Production and Decison-Making Tools and is named Greenhouse Cost of Production 100 crops. Click on it to download the spreadsheet.

“We thought this tool was needed by the small to medium grower that doesn’t have access to a software company or have an internal IT person to develop costing software,” says Dudek. The instructional video provides guidance for using the spreadsheet. And, the example supports that.

“You feed in the whole operation’s records so you can evaluate the larger picture,” he says. “You need to pull your records together. For example, you need to know costs for pots, soil, cuttings for individual items, seeds, etc.”

The first use requires time to build your model. Growers can input current costs from tax returns, invoices and quotes to estimate cost of production and project sale prices on a per plant basis for each enterprise. Then, in future years they can simply update the data.

Over time data will become more valuable as trends will become evident. And, that will improve the ability to measure and manage costs for greater profitability.

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