How much revenue do you want to earn in the coming year? $150,000? $300,000?
If you’ve read books like The Secret you know that you need to put out into the universe what you want. But putting down on paper or into the universe what you want isn’t a guarantee of achieving your goals. You need an action plan to get there.
The action plan may be a marketing plan (how to get the customers in your door, buying your products) or an operating plan (how will you produce your goods and services). And in order to define how many customers you need, and how you will service them, you need a deep understanding of your sales goals.
In this article, I’m going to address how to break down your revenue goals such that you can create the action plan. To understand your revenue goal, translate it into number of customers and average sales.
Whether you’re launching a new restaurant, or growing a current farm business, you probably have a good idea of how much revenue you need in order to achieve your profitability goals. Let’s say, your goal is $200,000 in revenue.
For a restaurant business, you’ll want to understand what $200,000 looks like on a monthly, weekly and daily basis. In order to achieve your sales goal, you’ll need to generate $16,667 in monthly sales. If you’re open 6 days a week, that’s about $625/day (I’m rounding the numbers for ease of calculation). Depending on the nature of your business, this can be a little or a lot. If you’re a sit-down restaurant, with an average check of $35/person, then you need to serve an average of 18 customers per day. That’s a pretty easy lift. However, if you run a breakfast/coffee shop, and the average check is $6/person then you’ll need to serve 104 guests per day; a very different scenario.
Understanding how many customers you need to serve per day, and how much they will spend, drives your marketing and operations plan (how many staff will you hire? How much food will you order?)
A farm has many options for selling its products – it may sell at farmers markets, through a CSA and/or wholesale. With a target revenue of $200,000, you’ll need to break the numbers down further — how much money do you anticipate earning from each revenue streams: from, say, attending farmers markets or selling wholesale?
If you decide that 25% of your revenue will come from farmers markets, 25% from wholesale, and 50% from a CSA, then you need to earn $50,000 from the farmers markets $50,000 from wholesale, and $100,000 from the CSA
- The typical farmers market runs for 28 weeks, so that’s about $1,800 per week.
If you can earn $900 on the average market day, then you’ll need to attend 2 markets per week
If you can earn $1,800 on average, then you only need to attend 1 market per week.
- The growing season is about 26 – 30 weeks. That translates to about $1,800 per week in wholesale.
If the average wholesale customer orders $200 worth of produce per week, then you need 9 customers.
If the average wholesale customer orders $100 worth of produce per week, then you need 18 customers.
- A CSA share costs approximately $425 for the season. If the target revenue for the CSA is $100,000, then you’ll need to sell 235 shares.
By understanding how much customers will buy (or receive) each week, you have the basis for a crop plan and labor schedule. And knowing how many customers you need for each sales category, you can create a marketing plan to find them.
This isn’t difficult math. Looking at your numbers from a different perspective can better position you to achieve your goals. You can now set targets for your marketing plan – what kinds of customers do you need to attract and how much will they spend – as well as your operating plan.