Enterprise Budget
Download 2024 Enterprise Budget – Version 1 Here.
(Download as an Excel File instead of Google Sheet)
Quicklinks
Introduction
Despite western North Carolina’s national presence in the Christmas tree industry, little economic research exists to assist growers. Many growers could benefit from increased financial resources to assist with farm planning. The last extension publication on grower finances was Jeff Owen’s Sample Budget from 2008. Much has changed since that publication, including supply chain inflation, average farm size, labor, and challenges such as Phytophthora root rot and climate-related issues. The novel challenges growers face demand new financial resources to assist in long-term financial planning and farm sustainability. Researchers at NC State, in consultation with extension agents and growers, developed an enterprise budget financial tool to provide growers an additional resource in their financial planning. This tool, called CT-FT, allows growers to account for all costs associated with growing an acre of Christmas trees and provides various financial analysis assessments. The Microsoft Excel-based tool can be downloaded from this publication at the bottom of the page.
Enterprise Budget Overview
An enterprise budget is an economic tool developed to assist agricultural producers in a specific industry in financial planning and provide cost, revenue, and profit estimates (Singerman, 2017). Enterprise budgets help producers better understand their operation’s finances and provide novel ways to assess their financial sustainability. Traditionally, enterprise budgets detail all inputs and outputs required to produce one acre of a crop. They include fixed costs, such as land value, machinery, and overhead costs, that occur regardless of production. They also include variable costs, such as seedling, herbicide, and labor costs, that can differ based on management decisions (Harper et. al., 2019). Enterprise budgets include line items of each input and output to tally costs and returns across management categories. Users add farm-specific costs and returns to these various lines to represent their specific operation. Enterprise budgets help producers by effectively tabulating all costs and returns associated with their operation and offering new financial insight.
Creating the Enterprise Budget
CT-FT is designed for WNC Christmas tree growers. While tailored to small-to-medium wholesale growers, this tool could still provide value to other farm types and growers in other regions. Small-to-medium wholesale growers were identified as a large industry sector who would most benefit from this tool.
CT-FT enables growers to tabulate all costs and revenues associated with growing one acre of Christmas trees. You can think of this tool as “growing an acre of Christmas trees on Excel.” To grow this acre, the tool asks users to input various management operation items and associated costs. Typically, these costs are accounted for by an “item cost,” such as a specific herbicide price and rate, and a “labor cost,” which calculates a labor wage price based on time. The tool comprises 18 different management categories, ranging from land value costs to shearing costs, and attempts to encompass all major costs associated with growing an acre of trees. A user would modify each management category to tally all associated costs. Once complete, the tool allows users to asses a variety of financial metrics otherwise potentially unknown to growers, including:
● Net Present Value (NPV)
● Yearly costs and returns
● Costs per tree
● Required labor hours
● Costs and labor hour breakdowns by management categories
CT-FT is based on the operational categories provided in Jeff Owen’s 2008 Sample Budget and contains 18 major operational categories [see Appendix I for more specific details]. Based on existing extension literature, interviews with extension personnel and growers, and available prices, each operational category asks the user to provide known price and time inputs to calculate associated costs.
CT-FT assumes the entire acre is in production. Excluding acreage from non-productive lands within an acre, such as roads, rocky areas, and Phytophthora hotspots proved too cumbersome for this project, and following the lead of traditional enterprise budgets assumes an entire acre of production. Costs of equipment, overhead operational costs, and marketing are included in the budget, but more detail is asked for costs associated with planting, herbicide applications, shearing, and similar management-decision specific operations. These particular costs change with management decisions and user inputs and will allow a user to easily see how these decisions impact financial returns. A complete list of assumptions is provided in Appendix II.
Value of Enterprise Budget
The enterprise budget is designed to improve Christmas tree growers’ financial understanding of their operation. Through consultation with extension agents and growers, there is a stated need for a tool that improves grower financial analysis, particularly with regards to documenting costs associated with specific management activities and a per-tree cost evaluation. This tool assists with record-keeping and offers financial analysis simultaneously. Prospective growers lacking financial experience in the industry could also use this tool to understand better the financial and time commitments of beginning a farm. This analysis has the added value of being tailored to an acre, the standard unit of measurement in other enterprise budgets and the financial sector (such as land value or loans). While growers may better understand their finances on an operational scale, providing per-acre and per-tree financial analysis assists in novel and valuable ways.
How You May Benefit from Using CT-FT
Evaluate per acre costs, revenues, and income for a standard acre by entering all typical management operations. By assessing a typical acre, growers have a better understanding of the financials and timeline on a per acre basis.
Evaluate per acre costs, revenues, and income for an atypical acre by modifying the initial management operations based on an atypical scenario. Growers can compare the finances for this atypical acre against a typical acre to assess how the atypical acre will change returns. These atypical incidents include but are not limited to high incidences of deer browse, Phytophthora spp. infestation, or negative climactic issues associated with climate change.
Assess trends in management costs by completing tool each year and comparing to past years to increase efficiency. Over multiple years, growers can assess operation areas that have changes in costs to better understand and predict future changes.
Assess cost/tree values by year and over the entirety of the rotation. Both growers and Extension agents alike have stated that a per tree value would be incredibly valuable and fill a knowledge gap for most growers. Knowing the total cost per tree can help growers better assess market prices.
Compare costs of different management inputs, such as applying different fertilizers or herbicides, over the course of the rotation by modifying which inputs are used. Evaluating the long term costs of various management inputs can improve grower’s decision making on which products to use.
Evaluate the current value of a stand at a mid-rotation age. If grower engages in a form of mid-rotation land rental, assessing all previous cost/revenues versus future costs/revenues can better assign a rental price. Alternatively, if grower is looking to sell their land, understanding the current value of trees on it can better assign a price.
Assess the per acre value of a stand for interacting with the financial realm, whether that be for a loan or value of the land. The ability to produce accurate per acre evaluations and future cash flow projections can strengthen applications for loans or valuations of the land.
Increase ease of tax evaluations with CPAs. Having documentation on yearly losses and profits can greatly increase the ease of navigating tax season.
Evaluate predicted yearly labor hours required to prepare for future labor needs. With labor shortages often serving as a limiting factor in operation expansion, predicting future labor needs assists growers in evaluating and accounting for future labor.
Compare costs by operational category and by year. Identify costly categories where attention could be spent to reduce costs. Growers can identify operational categories where they spend more than anticipated and consider cost-saving mechanisms.Visualize a timeline of costs/returns by year to prepare for rotation-long cash flow. Growers can better assess the rotational cash flow on a per acre basis.
Using the Enterprise Budget
The enterprise budget has been created to be as user-friendly as possible. Buttons allow users to navigate through the various worksheets seamlessly. Instruction pop ups windows are provided throughout the worksheets. A detailed instruction manual is provided at the beginning of the enterprise budget to assist users with the tool, and instructions will continue to walk users through every step.
Summary
CT-FT intends to help Christmas tree growers better understand and assess their farm’s financials on a per acre basis. This tool provides value to growers looking to better document costs and returns on a per acre or per tree basis, as well as can serve as a way to document yearly costs and returns. If you would like assistance in completing the CT-FT and maximizing its value, please contact your local extension agent or one of the listed authors.
FAQs
- How long will completing the CT-FT take?
Depending on your level of included detail, as well as your current record keeping, completing this could take anywhere from 30 minutes to 3 hours. The time put into this tool is what you will get out of it. - Can I receive assistance in completing the CT-FT?
To receive assistance on completing and maximizing the utility of the tool, contact your local extension agent or the authors listed below. - What should I do if the Excel file will not load on my computer?
Due to the coding capabilities required for this file, older versions of Microsoft Excel lack the capacity to run this program. Update your excel, or contact someone who may have a newer computer (extension agents should all have the most recent version of Excel on their work computer). Additionally, remember to enable Macros when first opening the file. - I grow trees longer than 9 years. Why does the tool only go up to 9 years?
Unfortunately, due to coding issues associated with double digit numbers, the current iteration of CT-FT only extends to 9 years. If demand exists, a future revision could address this issue. - What should I put if I am not sure of the specifics for certain values?
If you are not aware of certain values and do not have records on that value, you could ask your local extension agent what they might recommend, and/or wait until that management activity occurs during the year to better assess it.
Important Notes to User
Users must have a recent version of Microsoft Excel (2016 or newer) in order to use the embedded Macro functionality. Upon opening the file, ensure to click “Enable Macros.” Users should also turn OFF “cut, copy, and sort inserted objects with related cells” in Excel Preferences. To do so, follow the below instructions:
On PC: File–>Options–>Advanced–>Cut and Paste Options On Mac: Excel–>Preferences–>Edit–Cut and Paste Options.
References
- Harper, J. K., Cornelisse, S., Kime, L. F., & Hyde, J. (2019, March 29). Budgeting for agricultural decision making. Penn State Extension. Retrieved November 2, 2023, from https://extension.psu.edu/budgeting-for-agricultural-decision-making
- Owen, J. (2008). Appendix. NC State Christmas Trees Extension. Retrieved October 19, 2023, from https://christmastrees.ces.ncsu.edu/christmastrees-ag95-v/
- Singerman, A. (2017). Using Clickers for Data Collection for Enterprise Budgets. The Journal of Extension, 55(6), Article 32. https://doi.org/10.34068/joe.55.06.32
For more information about the Enterprise guide refer to the full technical document.
Click here to provide anonymous feedback on the Christmas Tree Financial Tool.
TOol Developed by
Sam Blumenfeld
Solomon Ghezehei
Justin Whitehill
