Farm Financing: Measuring Profitability and Success

Final Report for LNE11-310

Project Type: Research and Education
Funds awarded in 2011: $79,720.00
Projected End Date: 12/31/2015
Region: Northeast
State: Massachusetts
Project Leader:
Julia Grigg
The Carrot Project
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Project Information


The Carrot Project, and its partners, worked for two years with 23 farmers who desired both business and financial management technical assistance and/or financing. We focused on enterprise development to improve net farm income and help farmers reach their business goals. Each participant was paired with a technical assistance service provider for the duration of the project to track enterprise changes over a two-year period. Important results showed that participating farms had improved financial management skills and an average increase of 52% in net income over two years, and 55% saw a 142% increase in net farm income. The results of this project are described in this report and in the four accompanying case studies, and served as the basis for a seminar on farmer financial management called Making It Happen: Measuring Profitability and Success (ONE248-15), also funded by Northeast SARE.


When the project was developed near the end of 2010, it was generally understood that barriers to the development of local agriculture included a limited understanding, on the part of many beginning farmers, of what contributes to their long-term economic viability, e.g., the importance of record keeping and financial management, and the role of financing. The proposal originally focused on financing, but was modified at the request of Northeast SARE reviewers to include an equally strong emphasis on enterprise planning, i.e., helping farmers make informed decisions about their enterprises using financial analysis tools.

Since that time, the availability of financing has increased with new federal, state, and private sources, including the USDA-FSA Microloan program, crowdfunding platforms, and new ways to involve investors, through Slow Money and a variety of public, nonprofit, and private financing or lending sources. The availability of business assistance has evolved, more so in some states than in others, but has not changed as dramatically as the availability of financing. However, recognition of the need for increased amounts and varieties of business assistance is growing as farms seek to do what they love and sustain their livelihoods. At the same time, lenders and investors are looking to lend to businesses that have a clear understanding of their financial outlook. This work is timely because it shows the importance of increased skills in financial management and the work it can take to help farmers achieve that goal. These lessons have been developed into a Northeast SARE–funded training called Making It Happen: Profitability and Success.

Performance Target:

The Performance Target for this project is that 30 farmers without access to conventional credit will successfully complete enterprise plans; many of those 30 will complete applications for loans totaling an estimated $300,000 ($3,000 to $35,000 each). The farmers will use the enterprise plans and financing, if applicable, for projects to increase profitability and economic viability. An estimated two-thirds of farms will increase net farm income by 10% over two years; in dollar amounts, such an increase would represent approximately $150,000 in enhanced revenue by the end of the project (average per-farm increase of $7,500 X 20 farms = $150,000). All participating farms will provide evidence through unaudited financial statements, tax forms, and follow-up interviews. The Performance Target was short on all measures, except the increase in net farm income. A total of 23 (versus the projected 30) farmers completed enterprise planning and submitted sufficient information to be included in the analysis. The farms received financing of $254,000 (versus the projected $300,000), with an average loan amount of $28,000. 55% saw an increase in net farm income of 142% over two years; in dollar amounts this increase averaged $21,754, and totaled $261,000 (see Attachment A: Changes in Revenue, Expense, and Net Farm Income).


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Materials and methods:

The materials used in this project include the pre- and post-project surveys, the financial template, winter check-in questions, and individual farm analysis questions. These materials were used by the farmer and project staff to collect and synthesize information. All other materials, such as financial statements, were provided by the participating farmers or generated specifically for a particular farm project. A copy of each of these documents is attached. The goal of the methodology was to collect and collate farmer data in a way that allowed comparison from year to year and from farmer to farmer. The registered farms were split into two groups depending on their registration date (either 2012 or 2013). Each farm was matched with a program coordinator (PC) who worked with that farmer to collect survey and financial information, as well as to help examine their enterprise and, for most participants, to set goals for the upcoming season. The work with the farms varied from simply touching base and providing space for reflection and feedback, to more intensive work such as setting up accounting systems and providing instruction and support on running various financial analyses. Progress on projections and goals was reviewed twice, during the winter between seasons and again at the end of the project.

Surveys The goal of the surveys (Attachment B: Pre- and Post-survey) was to obtain qualitative and quantitative information from the farms on their business management skills and business goals. The pre-survey set the baseline for farmers’ skills at the beginning of the program. The post-survey asked similar questions in order to measure the farmers’ perceived changes in business management skills; it was also the last requirement for participants to complete.

The Financial Template The financial template (Attachment C) provided a standardized mechanism for tracking financial data from the registered farmers. Numbers from the financial statements provided by the farms — balance sheets, profit and loss statements, and cash flow information — were entered into the financial template three times to track changes in farms’ financial status over three years. The template was designed to calculate certain financial ratios automatically, which were then aggregated in the Aggregated Financial Ratios (Attachment D). Entry and review of these numbers for each farm were completed by one person, the data analyst, who worked in collaboration with the relevant program coordinator and the registered farmer. The Methodology for Financial Data Collection is included in Attachment E. The survey and financial information were enhanced by winter check-ins (Attachment F: Winter Check In Purpose and Questions) that the program coordinators completed for each of their farms. The farms used as case studies (Attachment G Case Studies) were chosen from the pool of farms for which an Individual Analyses was completed. The Individual Analysis used each of the documents described above, except the Aggregated Financial Ratios; in addition, it used responses to the Individual Analysis Questions (Attachment H). The entire project team discussed a summary of this information during a daylong meeting in September 2015. This project used program coordinators (farm advisors) from four different organizations. While significant work went into developing standard reporting and data collection processes, the project could have benefited from additional resources devoted to training for the program coordinators to ensure greater standardization of service delivery.

Research results and discussion:

Milestone 1: 250 farmers learn about financing programs and request information by Fall 2013 (125 in both 2012 and 2013); surpassed in March 2013. Farmer Outreach and Initial Farmer Contact: At least 4,200 farmers learned about Measuring Profitability and Success (MPS) and/or financing through various outreach activities, conducted electronically and as part of presentations or information exchanges. Approximately 30 farmers received information in one-on-one meetings or conversations with program coordinators. These conversations were initiated through a variety of means. Most farms registered as the result of an ongoing relationship with a program coordinator or after more than one meeting. Electronic communication alone is not sufficient to register participants, but is helpful to build awareness about the program. If this were a completely new program with no pre-existing relationships and standing (on the parts of both The Carrot Project and our project partners), it would have been extremely difficult to register sufficient numbers of farmers. It is possible that a much more targeted approach, reaching out to a smaller group of farmers, but ones with whom we had stronger connections, would have led to a similar number of registered participants.  

Milestone 2: 70 farmers decide to apply for loans and begin loan applications by Fall 2013 (35 in both 2012 and 2013); this number was too high and was not reached.   After the grant was awarded, the Project Director and Northeast SARE Administrator decided to place a greater emphasis on technical assistance, in addition to financing, and its impact on a farm’s financial viability. This change meant that this milestone was not applicable as written. In addition, many farmers’ need for technical assistance before deciding if financing was necessary added to this milestone’s lack of relevance. Therefore, the target of 70 applicants was clearly too ambitious.  

Milestone 3: 30 farmers (of the 70 that began loan applications) obtain or participate in business and financial management technical assistance to develop enterprise plans by Fall 2013 (15 in both 2012 and 2013); this was reached in Spring 2013.   A total of 33 farmers registered to participate in financial management technical assistance to develop enterprise plans.  

Milestone 4: 50 farmers (of the 70 that begin loan applications) implement enterprise plans, and 40–45 of that group also accept financing by Winter/Spring 2014 (25 in both 2013 and 2014).   The target number of farms designated in this milestone is an artifact of trying to project participant behavior based on insufficient historical information; therefore, the number is too high. Performance on this milestone is also affected by the inapplicability of Milestone 2 and the change to greater emphasis on business assistance. Nine, or 39%, of the participating farms received financing.  

Milestone 5: 30 farmers verify changes in economic viability and profitability by May 2015 (15 in 2014 and 2015, respectively).   33 farms registered for the program. A total of 23 (versus a projected 30 farms; completed enterprise planning and submitted sufficient information to be included in the analysis. 21 completed all requirements. Two submitted all but one document and are included in the results. Seven farmers completed materials for the first year, but no more. All of the latter faced serious difficulties and further participation was not a priority, and two ceased operation. An additional three indicated multiple times they would complete the registration process and did not. This rate of attrition suggests the need to register more than the original thirty-three, when setting milestones, and the need to consider the rate of closure for beginning operations.    

Participation Summary


Educational approach:

The publication and outreach portion of this project is underway. Initial findings were presented to the Research Working Group at the 2015 Northeast Sustainable Agriculture Working Group (NESAWG) It Takes a Region Conference in Saratoga Springs, New York. With additional funding from a Northeast SARE Partnership Grant, the results of MPS serve as the basis for Making It Happen: Profitability and Success, a performance-based training focused on improving financial management skills and decision-making. The foundations for the training are directly informed by the results of this project through use of the experiences of the participating farmers, their reflections, and those of the project coordinators. The training is being presented in eight locations in New England and New York with six different host organizations (see Attach J Making It Happen multi-state flyer FINAL). Four of the presentations are co-sponsored by USDA-NERME (Northeast Extension Risk Management Education).

No milestones

Additional Project Outcomes

Project outcomes:

Impacts of Results/Outcomes

Performance Target The Performance Target for this project is that 30 farmers without access to conventional credit will successfully complete enterprise plans; many of those 30 will complete applications for loans totaling an estimated $300,000 ($3,000 to $35,000 each). The farmers will use the enterprise plans and financing, if applicable, for projects to increase profitability and economic viability. An estimated two-thirds of farms will increase net farm income by 10% over two years; in dollar amounts, such an increase would represent approximately $150,000 in enhanced revenue by the end of the project (an average per-farm increase of $7,500 X 20 farms = $150,000). All participating farms will provide evidence through unaudited financial statements, tax forms, and follow-up interviews. A total of 23 (versus a projected 30) farmers completed enterprise planning and submitted sufficient information to be included in the analysis; 21 completed all requirements. Two submitted all but one document and are included in the results. Seven farmers completed materials for the first year and all faced serious difficulties or ceased operation. An additional three farms did not complete the registration process. This is a shortfall of 24% from the projected 30 farmers.   The farms received financing averaging $28,000, for a total of $254,000. This is 85% of the total expected loaned amount, $300,000, and in part reflects the decreased emphasis on financing, made after the performance target was approved.   Twelve (12) farms, or 55%, saw an increase in net farm income of more than 10%, for an average increase of 142%, or $21,754. The average increase in net income across all farms was 52%, for a total of $155,000 (average per-farm increase of $7,056 x 22 farms). The change in net farm income ranged from -260% to 416%. The net negative changes account for the smaller total when all reporting farms are included (See Attachment A).  

Observations: Overall   Reflecting on the entire data set, the following questions were asked of the program coordinators and farm advisors and our findings follow. This synthesis informed the choice of case studies as well as the curriculum for Making It Happen.  

What did we learn about how enterprise planning and financing can positively impact operations?  

CONFIDENCE: Improved management skills. Increased confidence relative to understanding financials, and how product/production relates to financials. Use of planning tools by more farms. Improved understanding of cash, financing, and how loans work.  

OUTCOMES: Increases in net income, financing, and heightened awareness of how business advising and consulting can help.  

IMPROVED SKILLS: Management tools for future use. Understanding of financial position. Use of financial tools, and indicators such as employment costs related to gross income. Creation of positive work habits.  

ADVISING: Receipt of feedback, confirmation of direction or decisions, provision of counterpoints to thinking, and opportunity to vent. Valued relationship with advisor.  

What three things are most important to a farm’s success in the program, i.e., meeting their goals and being on the right track?  

The cyclical relationship among setting clear goals (intention), reviewing goals, and making adjustments.  


    • Setting of clear and realistic goals
    • Achievement of balance between farm goals and life goals
    • Thoughtfulness about scale of production and ability to obtain goals
    • Use of tools to avoid burnout


    • Review of projections to ensure they are on track
    • Effective bookkeeping to review projections and compare to actuals
    • Agreement on direction of business at yearly review
    • Use of financial information as planning tool
    • Understanding of farm’s financial position and its implications
    • Cash flow budgeting
    • Commitment to meetings, record keeping, and organization


    • Identification of profitable products and services
    • Willingness to cut out poorly performing enterprises
    • Adherence to the plan (while being smart and strategic about it)
    • Ability to adjust expectations
    • Seeking ways to improve efficiencies
    • Making capital improvements
    • Willingness to make changes and mistakes

What challenges occurred most often?  


    • Addition of employees (i.e. needing labor but unable to afford it)
    • Management: keeping employees, hiring employees, having enough labor


    • Preparation for/management of the unexpected
    • Injury
    • Family matters
    • Weather
    • Recession

 MARKETS (as a subset of Risk Management)    

    • Market access
    • External market changes, and adaptation re: need to transition to different/new markets
    • Ability to “read” a market, i.e., to understand what customers want (vs. what they say they want)
    • Time management
    • Maintenance of market relations


    • Need to change plans and goals
    • Disagreement about business direction
    • Prioritizing time for strategic planning and decision making
    • Committing time during season for financial management and review
    • Continuing financial losses


    • Liking planning
    • Failure to make changes that planning indicates
    • Ability to learn
    • Career fit
    • Maintenance of cash flow
    • Comfort with line of credit
    • General time management
    • Administrative time management

How are the positive impacts of financing and enterprise planning different?  


    • Is a tool for understanding financial position and planning
    • Informs future needs
    • Allows internal analysis of production questions to get answers
    • Gives confidence that farmer can afford financing
    • Helps farmer look back, learn, and plan forward
    • Helps farmer decide how to grow
    • Enables understanding of profitability of different enterprises


    • When appropriate and well-timed, can help meet goals — at all, or quicker
    • Can have positive impact, but needs to be based on plan and principles within business
    • Addresses needs for growth when it supports increased production
    • Can achieve other goals, such as securing a line of credit (which does not expand business but helps with management), or obtaining a land loan (which increases security and builds net worth)
    • Helps move to next level of efficiency by adding capacity to reach profitability
    • Puts resource in farmer’s hand in the near term, potentially jump-starting action on plans that may have been postponed

Observations: Pre- and Post Survey  

The farmers’ self-assessments of their business management skills improved over the two years they worked with their respective program coordinators, as shown in the chart for Question 11 “Pre- and post-comparison of self assessed business management skills” on page 32 of Compilation of Pre- and Post-Survey Data, December (Attachment I). The number of farms in the “strong” categories increased between the beginning and end of the project, while the number of farms in the “weak” categories decreased. This change was due to changes in farms’ self-assessment from weak to moderate or moderate to strong; not due to (self) reassessments from weak to strong, or to those who self-assessed as moderate at both the beginning and end of the project.  

Farms with net changes in farm income of 10% or more were more likely, by self-assessment on Question 11 (Q11), to experience a positive change in their skill level and, at the end of the project, identify as having strong business management skills. However, it is important not to overstate this finding because of the number of factors outside of the farms’ control, such as weather or family dynamics.  

The importance of business management skills, or confidence in financial management, was reinforced by the project coordinators (see above). Farmers who were able to use their program coordinators as advisors rather than as instructors tended to see results more quickly. An example of the latter is a farmer who, after receiving help in setting up a financial tracking system, and after sufficient records are recorded, begins to use the financial information to make informed decisions about the farm. This stands in contrast to the former, e.g., a farmer who already had historical financial information to discuss and begin analyzing with an advisor.  

A related finding was that at the beginning of the project, 45% and 36% of participants identified planning and managing, respectively, as how access to business management education and advisement will enhance business viability (Attachment I: Q10, pp. 24-26). At the end, the two most mentioned enhancements from business management and advisement were records/budgets and managing, at 41% and 32%. One interpretation of this change points to a better understanding, developed over the two-years of the project, of how record keeping and tracking finances is important for managing an operation and is distinct from planning.  

A common finding from surveys of young and beginning farmers is that access to land and capital are frequently the highest barriers to getting started and becoming established. Participating MPS farmers had access to land so had overcome that barrier. In the pre-survey, 73% of participants identified access to money or capital as a factor limiting or constraining their ability to develop their business (Attachment I, Q9, pp. 19-23). However, in the post-survey, this dropped to the third most-mentioned barrier at 23%, behind labor and infrastructure. This change may indicate increased confidence in financial management or receipt of capital, and most likely some combination of these two factors along with a more nuanced understanding of the role of capital in relation to other factors constraining a farm business.  

100% of participants’ defined success as including more money, profits, or owner pay (see Attachment I, Q7 on p. 9). In addition to the previously noted changes in net income, 59% experienced a change in payment to partners or owners. Of the 16 that provided detailed answers, there was a 91% increase in payment for an average of almost $15,000 (see Attachment I, Q32-33, p. 58).  

Information derived from this work, especially when combined with the Making It Happen curriculum (see Publications & Outreach), would be appropriate for secondary audiences, including business assistance advisors, researchers, and lenders or investors interested in working with farmers. It could help business advisors understand the importance of their role and be used for training purposes for those looking to strengthen their financial management skills. It would, we hope, inspire other researchers to do related and follow-on work. Portions of the MPS work could further help lenders and investors understand the sector and the range of tools important to farm success.

Farmer Adoption

Although most participants found the project helpful, three did not, for various reasons, including disagreement with the project coordinator about the direction of a business and receiving less support than expected. The accompanying four case studies and the comparison of the pre- and post-survey results (Attachment I, especially responses to Q10, Q15, Q41-43 on pp. 24-29, 36-41 and pp. 64-66) are the best examples, in their own words, of what farmers adopted and their responses to their participation. A few representative quotes follow. “We worked full-time all winter making plans [and] budgets, procuring equipment, etc. (while also growing and selling winter produce) — this preparation set us up well for the first season.” Access to business management education and advisement has “given me better targets to shoot for, and a better understanding of financial planning tools.” “We did take on a loan in the past year [to put up a heated propagation greenhouse]. We felt confident doing this because of our increased confidence in our financial standing.” “It’s been a huge relief to be able to ask questions and feel like I am on the right track.”

Assessment of Project Approach and Areas of Further Study:

Areas needing additional study

A recommended follow-up study would be similar to MPS, but would include a control group of farmers not receiving the same level of assistance, and would more carefully evaluate their levels of training and performance at the beginning and end of the project.

Information Products

Any opinions, findings, conclusions, or recommendations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the U.S. Department of Agriculture or SARE.