Making money from your Wasabi Farm
Making money from your wasabi farm is really no different from making money from any business. The formula is quite easy and well understood by most people.
Profit = Income – (Costs + Expenses)
So if you are making a profit then you are making money (in theory).
Where it starts getting complicated is when you have to take taxes into account, and depreciation and a whole lot more of accounting jargon.
What you must do is include your salary (which you take out before anything else every week / month) into the operating expenses. Take this set amount on a regular basis before you pay any bills. It is important that you do this because your well-being and your families well-being is more important than the wasabi farm business and other creditors. At the end of the day it comes down to the fact that if you are not getting anything out of the wasabi farm then why are you doing it.
Sorting out the wasabi farm economics I tend to do from the back-end to the front, and repeat that until I am comfortable with the results.
Start with total costs (TC) of setting up the wasabi farm (start with a best guess). Now decide what return on investment you want. I suggest you start with 10%.
Add the total operating costs (TOP) until first harvest. This has to include your salary, power and any other outgoings. Include the mortgage payments on the land as well. Remember to add the cost of cleaning out the system and replanting it for the next harvest.
Now we have
TC x 0.10 = Income – TOP
Income = TC x 0.10 +TOP for the first harvest
Now divide the Income from above by the number of plants you propose to have on your wasabi farm (less 10% for losses) – plants do die!
Now we have required income per plant.
Required income per plant = income / (number of plants x 0.90)
From your marketing research (you did carry one out didn’t you), you will know what people are prepared to pay per plant in your marketing area. Is the number you just calculated close or preferably less to the market research price? If it is less then you are likely to make a profit – if it is higher then there are a couple of options you should look at.
- Find a better paying market
- Develop your own unique product that gives a better profit margin.
- Increase the number of plants you have on the wasabi farm. This option seems to be counter-intuitive, but it isn’t. The fact is that the bulk of the costs for more plants has already been paid, there is minimal cost in adding more plants. This will mean that you need to redesign the layout to accommodate more plants and to connect them to the proposed growing system. Remember at this stage it is still all on paper so it isn’t a matter of cancelling equipment orders or anything too onerous. 🙂
Personally I would look at all three options.
Using the above formula work backwards from the amount per plant that you discovered from your market research and find the minimum number of plants you will need to break even.
Can you fit this number of plants onto your wasabi farm? Does it require significant changes to your initial design? If so, make the changes (on paper again) and run through the above evaluation again. Those of you who are good with a spreadsheet should be able to set one up to come up with the optimal results you want.
Now you should have a wasabi farm design that will make you enough of a profit and allow you to replant the next crop as well.
I am sure that if you show the above to an accountant he will fall about on the floor laughing, but for a first cut at the wasabi farm economics it will give you enough information to figure out if setting up a wasabi farm for the market you have identified worthwhile.
The simple spreadsheets I gave you in earlier lessons will give you some of the costs you need (with a bit of extension).