Brett Grohsgal, a former chef, owns Even’ Star Organic Farm with his wife Christine.
Located in Southern Maryland, they grow vegetables year-round. In the summer, they grow 25 varieties of heirloom tomatoes, as well as chilies, cucumbers, sweet potatoes, herbs, cut flowers, four varieties of watermelon and okra. They sell their produce at farmer’s markets in DC, through a community supported agriculture program (CSA) and to restaurants in the DC metro area.
This case study was presented at the American Accounting Association, Management Accounting Section Conference, January 10-12, 2008
Food Consulting Services
- Business Health Check
- Product and Distribution Analysis
For many small business owners, the concept is built around a passion and a skill. For Brett Grohsgal, the passion is tomatoes and the skill is a master’s degree in soil management. His business is successful because of his ability to manage the soil and the gene lines of his organic seeds. For all his talents, he does not want to spend time in the office entering invoices, much less analyzing the health of the business. The faster he can return to the fields, the more crops he has to sell.
Brett’s challenge is that for all his hard labor, he ends up earning about $3 an hour in years of horrid weather and only about $8 when the weather is good. In order to bring the farm a level of financial sustainability, he needed a business “health check.”
The ultimate goal of the “health check” was to determine opportunities to increase profitability based on current labor and land constraints, recognizing that weather was a variable that cannot be controlled.
After combing through 3 years of worth of sales and harvest records, we were able to determine the profit margin for each product and each distribution channel.
The analysis yielded two important findings:
- The tomatoes, his feature crop, were netting $.10 per case! While this is an important crop for marketing purposes, it needs to be viewed as a loss-leader. As such, Brett reduced his focus on this crop, increased the per-pound price charged, and shifted his focus on the more profitable crops.
- CSA is the most profitable distribution channel. Farmer’s Markets and Restaurants are still an important part of the business model in that they provide useful marketing, and an easy repository for excess product.
After shifting the focus of production and distribution, net profit increased by 28%!