So, welcome.
I'm Mark Cannella, University of Vermont A Extension.
I'm a farm business specialist.
I've been working with maple producers on business
and finances for the past several years as well.
Tonight's presentation will be on Maple Financial Planning.
What I hope to do is bring you through
a few different projects and a few different approaches
that we've taken to financial analysis with maple producers,
a little bit of financial research on maple startups,
and our benchmarking program,
which has been going now since,
2014 is the first year
we started benchmarking maple producers
and that's detailed financial analysis,
analyses, with active businesses.
So, I'm gonna jump right in.
This one's rescheduled. So, we're here on the 28th.
We've got one more webinar comin' up next week,
which is sap Business Models with Chris Lindgren.
That'll be our last webinar of the fall season.
Financial goals, so, let's dive right into it.
I guess one of the things that I'll say
for people watching tonight or watching the recording,
I guess the big question is, you know,
who's gonna benefit from this information or who wants
to know this information?
I know that I have been meeting on occasion with
agricultural lenders.
They're really interested to know
the financial performance of businesses.
They're also becoming increasingly interested
in the startup investment for businesses,
especially as they look to deploy capital for big startups,
big setups of sugar bushes,
so getting a sense of those investment levels has been key
from the lending community.
I think we're also aware that there's a number
of maple producers that are out there,
perhaps operating at one scale
and considering growth generally.
I don't hear many maple operators talking
about giving up taps or getting smaller.
So, the prospect of growth, I think,
brings with it the question of what's the investment?
What's the next step to go to a different scale?
So, I hope tonight that some of that will be relevant
and then, if you're actively managing maple business,
we get into the maple benchmarks,
the financial analyses with active businesses.
It's just great to see what's going on under the hood
of these businesses, so to speak,
see what the parameters are financially,
and consider how it relates to your business.
So, here's some basic financial goals.
Whether I'm doing kitchen table business consultation
or we're doing research, these are the 'how' questions.
How much is enough? How much money is enough?
How much money is needed?
How much do you need at the bare minimum?
And how much is possible?
What's the scope of opportunity here?
So, let's think about that. How much is enough?
How much is needed?
And how much is possible in the context
of some of these groups?
Business establishment, startup investment.
How much is enough to get started up
with the right resources?
How much is needed at bare minimum?
Operating funds, it's not just the startup investment to get
the tubing systems up and the tanks in place
and the sugar house built.
We've gotta consider that first season,
this first several months even, labor, fuel,
all the different expenses that are gonna happen
that aren't investments, but are def,
definitely necessary to get that business in production
before even a drop of syrup gets sold.
Theoretically, after the production season's over.
Livelihood. What's your owner compensation?
Are you looking for a paying job? How much is enough?
How much is needed at minimum? How much is possible?
Perhaps you wanna give up some other work
and focus more specifically on the maple enterprise.
So, we wanna think about livelihood,
cost management for sure.
We started to get into different cost categories
and tonight, we'll look at a few of them,
and we'll look at some of the frameworks.
How much should you be spending, or could you be spending,
on packaging compared to fuel, as an example?
And then sales and revenue forecasting.
A pretty important piece of the financial equation
is setting prices, having good sales targets,
and being able to not only plan for, but, and predict,
but to achieve those revenue goals in order
to have enough cash flow to do what you need
for investments, operating costs, and theoretically,
back to livelihood, gettin' yourself a paycheck.
I'll start off with some startup investment research we did.
We worked with Rob Guay at Viewpoint Ag Valuation
and Consulting over the past year.
I think it's important to note that some of these resources
could be a little dated with the recent inflation
over the past several months, so if anything,
these cost estimates, I hate to say it,
could be a little bit lower given that a lot of things
have gone up in the past year.
So, Rob went out and he basically specked
out different maple operations at different scales,
worked with two different equipment manufacturers
and their dealers, and looked at what it would,
what would it cost for a bare minimum to set up a business.
We've got two different profiles I'll show you.
We've got sap collection only without processing the sap
and syrup, just the sap collection,
and then the other profiles are gonna be Sap-to-Syrup
where we're actually gonna bring that sap from the woods
into the sugar house and finish it into syrup.
The Sap-to-Syrup processing models are all based on putting
the syrup into bulk barrels.
We're not looking at any container-type packaging for retail
or anything of that nature.
It's considered a bulk business
for simplicity on the investment.
I'm gonna reach over.
I've got some printed copies of the profiles.
There's a lot of assumptions that I'll glaze over
a little bit tonight,
but I wanna refer you all to these profiles that are online.
And we got several scales in different growth stages.
Okay, so first, looking at the sap-only profiles, again,
this is a basic financial model where Rob and I went
and we said, "What are the basics to set up an enterprise?
Let's get those basics down?
Let's figure out the general cost and get it documented
for a startup investment."
So, we've got tubing system and setup,
monitoring systems for leak checking, vacuum pump, or pumps.
We've got a little bit power driveway, some basic site work.
We've got the extractors, releasers.
We've got tanks and Rob set these up pretty lean and mean,
so the sap-onlys have a shipping container,
which would be a home site in the woods
to house the equipment.
We looked at a bunch of different scales,
3000 taps up to 15,000 taps.
I'm gonna show you a lot of numbers in a second,
so I'd just ask you to think
about what you're most interested in
from a scaling perspective.
You'll see similarities across these different scales.
It's a pretty course investment model we used,
but rather than get overwhelmed
with five different business models,
be thinkin' about what scale you're most interested in.
So, here are three of those scales, 3000 taps,
5,000 taps, and 7,000 taps.
You can see that across the top.
And then we've got two rows here in this table.
We've got the startup investment for the sap enterprise
without the purchase of the real estate,
so this is gonna be the investments I just mentioned,
and then we've done a little bit of an add-on.
That bottom row is the total investment plus the cost
of forest real estate, assuming it's a purchase.
And for this line,
we used a basic metric of $2,000 per acre.
Some of you are gonna be in regions where the values
could be lower, 500, $800,000 an acre for forest land
in pretty rural places.
I also know that folks in Western New York and Pennsylvania
are looking at expansions
and because of the real estate costs there,
they could be looking at well over 2,000 an acre.
So, these are really basic course estimates
that at least get you, you know, on the planet, so to speak,
and then you can fine tune from there.
And I've got two more samples here.
I've got the 10,000 tap and the 15,000 tap model.
Again, same rows.
We've got the no forest investment, just the equipment,
and then we've got the forest estimate below.
I'm gonna circle the things that I think are most important.
The dollar values across the scales obviously change
because there's more taps out there,
but if you look at that top table, the 3000 taps,
5,000 taps, and 7,000 taps,
you're gonna see that we feel like the sap-only setup
in a very modest system is gonna be running in that range
of $34 a tap down to $31 a tap.
That's a number.
It's a number that you can take.
You can, I wouldn't say you could take it
to the bank just like that.
Build it out and and work from it,
but these are the magnitudes we're lookin' at
for these sap-only setups.
Obviously, when we start to add in the cost of real estate,
these numbers are gonna go up and if I click, let me see,
nope, it's gonna go away.
So, when you start with that 34, 32, $31 at the top table,
$31 for the 10,000 taps and the 15,000 taps,
I'm gonna check if that's a typo, 37.
I know that some of our systems haven't gotten cheaper
with scale, but for some reason,
I think that is gonna be a typo
and I'm not gonna be able to check that now.
So, I'll ask you to make a note.
If you're lookin' at that 15,000 tap, double check that 37.
All these guys are now posted online
and we'll cross-reference that.
So, you can look at those numbers.
$30 tap, if you add the real estate on,
we're certainly bumping it up.
$2,000 per acre.
It's, you know, adding almost another 35, $36 an acre,
or a tap, I'm sorry, 35, $36 per tap additional.
So now, you're up to $70 per tap, $68 per tap.
Significant investments for sure.
Definitely a more modest investment here
with a sap-only enterprise than if we're gonna go
into syrup processing, which I'll do in a second.
I'll leave that up for a minute so you can take a look,
find your numbers you're interested in.
Okay, now, we're gonna go on to sap and processing combined.
Generally, I think the,
whether it's nostalgia or mindset, perhaps control,
people certainly love the idea of harvesting sap and making
a finished syrup product, so we're gonna start to add,
or we're gonna start with the investments we had before,
everything from sap collection.
Then, we're gonna add some basics to sugar house,
reverse osmosis, concentrate tank, additional tanks,
permeate tanks, evaporator filter press,
miscellaneous tools, barrels, again, lean and mean.
I think it's important to note
that this investment profile generally will show
a lower investment level
than the benchmarking project I'll show later
in the presentation.
With the benchmarking work,
we're going out and we're meeting
with actual business owners and we're stacking up all
the things that they own,
everything in their sugar house,
everything in their business office,
everything in their garage,
and there's a lot more things included
in an active business.
We've got laptop computers.
We've got specialized equipment that didn't necessarily make
it into this model.
Some people have towing equipment
to pull logs out of the woods.
All that stuff that we would expect is relevant and,
I don't wanna say necessary,
but not a surprise given a specific site
or a particular type of management.
These models are gonna be, I'd say, as lean as you get.
So, I'm gonna pop up tables again with a lot of numbers.
We're gonna see 5,000 taps, 10,000 taps,
two models with direct-to-sugar-house systems.
Then, we're gonna also look at some hybrid models here,
which we think is very relevant for operators.
10,000 taps is gonna be 7,000 taps directly
to the sugar house plus a 3000 tap woods
that's adjacent for sap hauling,
not particularly, not necessarily owned.
We've got the 20,000 tap model,
which is the assumption
of a 15,000 tap enterprise going directly to the sugar house
and that same operator going and finding a lease
for 5,000 taps nearby and hauling the sap back
to the processing facility.
We've gotta circle there, but we've got no numbers.
Let's open it up here.
I'm gonna go through a couple of slides
with the two different models here that are direct
and then in a second, I'll flip over to the hybrids.
I circled that per tap number again.
You can certainly see the magnitudes.
5,000 tap direct over $250,000
before the forest real estate, 10,000 tap direct,
almost a half a million before we buy the real estate.
Those numbers certainly are gonna flex depending
on what you're considering yourself.
So, I think it's always great to look
at that per-tap metric.
5,000 tap direct, we got $52 per tap investment.
10,000 tap direct, we've got $45 per tap.
What I've noticed with this project is that the economies
of scale seem to stack up a little bit better once you're
into processing and I'm gonna check that typo again
on the largest sap-only enterprise cause I think
that 37 was off,
but what we'll see is that there is some cost savings
as sap-only enterprises get larger,
but I think the numbers have shown that the economies
of scales kick in a little bit more
with that processing facility.
Now, I don't wanna tell you that,
in order to save $7 per tap,
you've gotta spend $400,000 more making syrup
at a processing facility,
but if you're thinking on a per-tap basis
and you're thinkin' as I start to add units
of production here, it looks like processing does start
to experience some economies of scale.
So, I know that's kind of a misnomer at the bottom,
that processing gets cheaper as the scale increases
cause I think everyone would agree that processing
is quite an expensive endeavor to get set up for.
So, here's our direct models, $52 per tap, $45 per tap,
and, yeah, I mean,
we start adding real estate in that 10,000 tap direct model
and over $800,000 at minimum.
These are significant capital investments.
Now, we've got the next two models which incorporate
a direct-to-sugar-house setup
and then there is this 3000 tap satellite bush.
The larger 20,000 tap operation has got
the $5,000 satellite bush.
Lookin' at those numbers again,
you'll still see that cost reduction on a per-tap basis.
Again, the processing facility savings starts to kick in
and we see $46 per tap with that 10,000 tap model
and $40 per tap, this is our lowest so far,
with the 20,000 tap model.
Of course, when you look at the total cost
there fully loaded with real estate,
we're lookin' at over 1.3 million dollars.
So, again, I don't wanna keep harping on saying
that it's cheaper to process at a large scale.
It's certainly a significant capital investment.
These are barely basic numbers.
These are great guidelines, I think, for people,
especially someone that's at 2,000 taps,
maybe thinking about seven or 10,000 taps,
it's very likely that a large amount of your system
would be completely overhauled, possibly liquidated,
in order to set up your new system.
So, being able to peg the number, whether it's 30,
$35 per tap for a sap setup,
or we could be 45 to 50 for a processing setup,
at least gives you the sense
of how much capital you're gonna be investing
in this business to get goin'.
Okay. So, shifting gears now.
That got us through our startup investment models.
Lookin' at cost analysis,
this is gonna be a mix of some of the benchmarking work
that we've done and hopefully getting you to think
a little bit about your own business.
Cost analysis first or last? Is it business planner?
Boy, it's really tempting to count revenue.
I think, as a business owner,
I think everyone loves
to do sales forecasts as a discipline.
It's great to consider doing cost analysis first.
If you can do the cost analysis,
you can start to line other aspects of your business up
with the cost structure.
So, what does cost analysis improve?
Certainly cost management, right?
We're gonna look at specific line items
and we're gonna think
about how we can better manage the costs.
Setting sales goals,
if you have a sense of your cost structure,
you can then be a little more thorough,
more accurate in setting sales goals
that certainly cover your costs
and cover your costs theoretically, plus profit,
plus margin, for your owner and management.
So, knowing your cost really becomes the key
to having a good marketing plan, having a sales forecast.
And I mentioned setting prices as well,
not just total revenue, but setting the specific prices.
If you're in a position to do that, certainly is,
it's part of the equation and knowing your costs is gonna be
the first part of that.
With any enterprise, whether I'm talking to a manager
or I'm looking at the financial statements,
I try to identify the top three costs.
There's a lot of costs that's on a financial statement.
I don't think it necessarily is worth the effort
to go chasing certain cost categories that are minor.
I certainly would look for the largest ones first
and then the second question is to ask which of the ones
that are possible to manage.
An example of a fixed cost, like, maybe an insurance policy.
Yeah, you could shop it around,
but will you be able to have
any major cost reduction on insurance?
You have to ask yourself that.
You have to know the system and try it.
That's very different than looking at a cost like,
let's say, packaging and trying to figure out,
do you have the option to make any improvements
on how much you spend there or not?
So, those are gonna
be really specific questions per business.
What are your top three costs?
And then, of those largest costs,
I would try to highlight the ones where you feel like you
have an opportunity to make a change,
make a management decision that could impact that.
Looking at these categories here,
this is what we found in our benchmarking work.
This is somewhat of an aggregate over the past few years.
The percentages will change a little bit, but we,
what we found, by and large,
is the largest two cost factors for most businesses,
labor, combination of paid labor and the unpaid labor,
the value of unpaid owner labor.
Next largest cost is depreciation.
The sleeper here is both of these
are potentially non-cash expenses.
The paid labor is certainly a cash expense,
but unpaid owner labor, not necessarily a cash expense.
Definitely, operators out there running business entities,
they'll keep what's left over if they can.
If there's nothing left over that's just, you know,
it gets rolled back into the business for investments or
operating costs and that's the nature of running
a small business on good years and bad years.
So, there could be a lot of non-cash expense there
with unpaid and then depreciation,
definitely a non-cash expense.
You've already had your investment outlay on the equipment,
but the depreciation is the wear and tear and the loss
of value on that equipment over time.
It's not a cash cost that you write a check for.
Theoretically, you could put that money away
in a side account so that when the RO times out
and hits its lifespan,
you actually have that money available for the reinvestment,
but it is not necessarily a check that you write,
it's an economic calculation.
It's an accurate calculation, we feel,
to evaluate profitability, but I certainly get beat up
when I work with people and they say,
"You're, you know, Mark,
you give me all these costs that don't actually exist."
And I say, "I know. They don't exist."
But depreciation can catch up with you and believe me,
unpaid owner labor, I hate to say it,
but it's startin' to catch up to owner managers
that are lookin' at maybe business sales,
exits, or transfers.
It's one thing to wanna run your business for the passion
and maybe sacrifice some compensation.
It's a whole nother thing to try to transfer
that business entity to another person and expect them
to make that same compromise on compensation.
So, we want people to factor that cost in and try to find
a business model that can start to chip away at it.
So, labor, depreciation, and we've got a whole bunch
of other categories and it really will depend
on your business model there.
Packaging and supplies. I don't say supplies.
Supplies is a general.
You all know that from your accounting.
Supplies is your biggest expense category
cause it's all dumped in,
but packaging specifically can be extremely high
with retail-focused businesses.
So, I'd say paid labor, depreciation, and then,
once we get past those,
we really get into this business-specific analysis
to figure out, what's number three?
What's number four?
So, what do we do though?
These aren't numbers that necessarily tell us
that we're gonna shop for a better evaporator.
These aren't numbers that are tellin' us specifically
if we can maybe use some different components
in our tubing system to save money.
These numbers tell us that we need
to focus on labor efficiency.
If, theoretically, we're paying ourselves
or we're worth something to pay
and we're paying other employees,
we wanna focus our cost management on keeping labor
as efficient as possible
and then making appropriate investments
and maintaining property.
If we can maintain our equipment longer, if we can tune it,
service it, take care of it, avoid accidents,
then we could be having potentially the biggest impact
on our maple business because these
are the biggest pieces of the pie.
So, when I talk to managers about this idea
of being effective as labor, our labor managers,
managing our labor time,
I hear people basically saying,
"You know, what we need to focus on is paid labor,"
and let's say, unpaid owner labor.
Every effort should be made to making sure that extra labor
or the focus of labor is placed on yield
and revenue enhancing activity.
I know that's a big generalization to say
that you're always gonna be finding a way to make money
because there's, there is stewardship of the forest.
There's plenty of activities off-season
that don't seem like they're directly related to harvesting
the sap, but for those that can and when the time is right,
to be very specific about when you deploy time,
make sure that it's doing something to enhance the yield of
the sap and or the overall revenue of the business 'cause
that's gonna be able to compensate for your time.
Some strategies, setting targets,
setting targets on time spent rather than just
having it be until it's done,
but setting targets on how much time's available,
setting targets on criteria for improvements projects
in the woods, and then, as far as employee management, boy,
there's a whole world out there on building strong teams,
strong communication, giving employees the incentive
to perform within your business,
and I would highly encourage you to, when you get a chance,
to grab some leadership books,
grab some resources that really can help you form your team
because there is opportunity to compensate.
There's opportunity to create incentive and certainly,
celebrating performance with employees is,
are great strategies to keep them invested,
and not just the hour of work and the wage,
but the overall success of the business.
Some of the big ticket items, tapping training,
making sure that people
that are tapping your trees are skilled.
They've been trained. You've got the right equipment.
Leaks from the tap hole,
inappropriate tapping is often cited as one of the things
that can really wreck the yield
and can really hurt a business.
Leak checking in general,
in-season if you're on high-vacuum systems,
spending the time, again,
putting that paid labor out there to keep
the leak check going and to keep the system tight
is a yield and revenue-enhancing activity.
And then the mistakes. We do hear this.
Different mistakes: veils, cutoffs, hookups,
making sure you can avoid those spills, or those overflows,
that's given away the money that we all need
to make these businesses viable.
Yield investments here. Just a couple examples.
Theoretically spreading fixed cost over more units.
Again, that's the scaling thing,
which I know is difficult
for some people given their constraints,
but we do see some efficiency as the scale gets
a little bit larger,
and then yield-enhancing investments again.
So, not just the labor to increase yield,
but what are the things you can spend money on
to enhance your yield?
Maybe it's a forestry practice.
Maybe it's that tapping equipment, the things like that.
Scales, another thing comes up,
scales and measurement devices,
a way for people to really fine tune what's goin' on,
whether it's production or whether it's retail-based.
A few more here.
Tubing upgrades, not putting 'em off if you can,
making sure pumps are functioning,
certainly hear about aging pumps not drawing like they were.
Remote sensors and leak checking, I think,
is something I've certainly come to realize,
for some people, is a way to enhance yield.
Sometimes, leak checking comes with a trade off
of more labor, more time,
possibly more payment going out for employees
that have to check leaks, so there is a trade off there,
but generally I think people have been finding
that they can get their yield levels up
across the board, right?
How do we increase yield and then yield in price?
All those things factor into the costs.
I'm a little light on marketing.
I'm a finance guy, so I do leave it to the creativity
of you all to figure out what investments can be made
to increase the value of your final product.
It's one thing to be chasing more sap in the woods.
For some people, they've already hit their maximum already
at 27 inches, vacuum pullin' as much as they can
on strong, healthy trees.
That's gonna give you the sap to make
as much sugar as possible.
But then what happens once you've got that syrup finished?
Is it going into bulk barrels? Is that the best fit for you?
I know, for some people,
getting rid of that syrup before they have to market it
is the cleanest and the most efficient use
of their time because they're gonna move on
to other activities over the rest of the year.
For others that have more of a marketing bent,
what are the investments you can make to increase value?
Not just to increase costs, you know,
to add cost to retail, but increase that value of syrup.
All right. We're gonna flip gears here now to benchmarking.
There's a look.
The 2020 Northeast Benchmark Report is in our website
and if I didn't mention it,
those startup guides that I showed the numbers for earlier,
each of those, I think there's six or eight of 'em total,
those are posted on www.maplemanager.org,
so you can see those startup guides as well.
Let's look at some of the numbers here
from our 2020 analysis.
Sticking with a theme of startup costs,
I thought I'd start with intermediate investments
in intermediate assets here.
Average investment over the, I think,
12 to 14 businesses we worked with in 2020,
about $47 per tap total investment,
that's the average across all of them.
I will say, the, I don't know if I've got the sample here,
in 2020, we've definitely shifted gears
from prior benchmarking years.
I think our smallest participating business is around seven
or 8,000 taps in 2020 and we're up to a couple businesses
over 50,000 taps, so we are moving to much larger scales
when you look at this benchmark project.
If you looked at some of the reports from 2014, 2015, 16,
we had some smaller enterprises here and some
of the investment numbers could be a lot larger.
So, $47 to tap average.
We've done some different breakouts here and we'll find that
the above average yield producers in this study are lookin'
at $56 per tap, definitely higher than the $47 average,
and then we look at the below average yield producers.
In this same group here, we've got an average of $39 a tap
and this is something we've seen consistently
for the past few years here,
that the larger yielding operations tend
to have newer systems, higher value systems,
higher startup investment, or more recent investment
to achieve that yield.
So, the high yield is certainly possible.
High investment in order to accomplish it.
On the bottom right, that chart shows you
the different average investment level per tap at scales
and this one, I look at this having worked with a couple
of these producers directly and seen the numbers
on the other ones,
I'm not exactly sure why we've got a spike $68 per tap
for the 8,500 to 15 or 14,999.
With any of these projects,
the small cohort studies we've got,
I like the idea of breaking into two groups there,
the above average yield and the lower, below average yield.
Once we start breakin' it into these small groups,
we could potentially have maybe only three or four people
in one of those groups,
so I'm not ready to say that 8,500 to 14,000 is gonna be
a huge additional investment.
It could be, but I'm not exactly sure if the numbers
are biased 'cause of the small sample.
Going through the producers that I know are in this group,
one thing that I will say is that I have a feeling
that we've got a couple more businesses in this scale
that are heavy into retail and wholesaling,
which adds another level of equipment to their setup,
potentially delivery vans, delivery vehicles as well,
are costed out in these models.
So, that could be what's goin' on with that 8,500 to 14,999.
It could be the additional investments
for packaging retail delivery.
I do know that larger enterprises
over 15,000 almost exclusively, well, not always bulk,
most of 'em are bulk,
but there's a couple people doing retail in that group
of $41 per tap.
So, I'm just talkin' through the nuance here.
Small benchmark study here.
We do wanna be cautious.
We want the numbers to get us to think,
but we don't wanna make some conclusion
that could be misguided.
Now, we're gonna look at cost of production right here.
I'm just gonna look at the bulk group.
Cost of production on the retail and retail wholesale mix
can be confusing with a small benchmark study,
so I've got some estimates I'll show you in the next slide,
but the bulk one,
we do think it's worth looking at these and trying
to figure out if there's a trend.
I wanna look at the pounds per pound I've got circled there.
Average in 2020, $2.41 a pound.
It feels like the right average you're looking for,
the low $1.62, certainly low cost of production there,
and the high, $3.07.
I'm not gonna jump ahead and say that the 60,
80,000 tap enterprises in the study are necessarily all
the $1.62 or $1.80 per pound cost of production.
Some of the newer enterprises certainly
are running higher cost.
It's not just a function of scale.
I think it'd be dangerous to assume that just when you,
just because you get big,
you can drop your cost of production below $2 per pound.
I think it's possible, but I don't think it's a guarantee.
We also do have the potential
of having some older businesses
with some really worn down equipment that often
get us to lower, a lower cost of production, like $1.62,
if the sugar house has been fully depreciated out.
So, some of this is also gonna be age of the business.
Anyway, $2.41, this is consistent over the past few years.
We've definitely seen these spreads
of low cost and higher cost bulk producers,
but we've often found this average
is somewhere around $2.30, $2.40 a pound cost of production.
So, look at that retail wholesale mix.
These are numbers that really don't exist anywhere other
than an average on paper.
We do see this average of $4 a pound,
or around $44 per gallon equivalent,
for some of these businesses that mix retail and wholesale.
The reason I say the average doesn't really show up anywhere
on paper, we've got large differences
with someone who maybe is,
maybe they're selling 70% of their syrup bulk and 30%
is going to a very high value retail, direct marketing,
and in another situation,
we could have someone with 60% or 50%
of their syrup being sold as bulk and the rest
of their syrup may be going to some mid-value retail,
but maybe some more wholesale accounts.
So, the, that price, the $44 a gallon,
probably doesn't specifically show up across the board.
It may for a particular package size,
but it's kind of a, an aggregate of the the whole business.
But again, going from $2.40 a pound cost of production
to this $4 a pound,
we're almost not quite twice as much on cost of production
to have these mixed models.
Now, going the next level, the heavy retail mix,
we have worked with a few enterprises anywhere from 2000
to 8,000 taps that are doing heavy retail and what we find
by and large is their per gallon equivalent cost
of production, anywhere from 75 to $90 per gallon.
What does that tell us?
This tells us that anyone that's running a large amount
or majority of retail sales probably is not
in a great position to be selling syrup strictly
by the gallon or half gallon.
You do need to be finding retail price points
for package sizes that are gonna be up to 75
or $90 per gallon equivalent.
So, I can't spec you the prices right off my memory here,
but that means we've gotta find the comparable price
for quarts, pints, and half pints that will get us
into that $80 range per gallon equivalent.
Again, we're not selling gallons here for 75
or $90 per gallon.
The per gallon equivalent means when we take our whole crop
and we spread it,
everything from NIPs to a small number of gallons,
we're gonna get that 75 to $90 range net returns.
So, we've seen investment. We've seen cost of production.
Now, we gotta look at what's left.
This is what we found in 2020.
I've got two groups there on the left.
I've got a less than 15,000 tap group
and a 15,000 tap and larger group.
Those are the rows on the left hand side.
And then we've got some ranges.
We've got a low, a high, and an average
that we'll look at tonight.
This is what we saw in 2020.
We've got the 15, less than 15,000 tap group.
We had -12% margin, -12% profitability,
range high up to 9%,
and an average of 2.2% positive profits.
The larger operations, again, a small group here,
we've got several people over 15,000 taps.
We've got a range of -10% to positive 9%.
The overall average -1.6%. What does this tell us?
I don't know if this tells us so much
that larger enterprises are less profitable.
Again, with a small group,
I'm not gonna jump to that conclusion.
What I would say is equal opportunity for profit,
equal opportunity for losses here across the industry.
Site-specific, management-specific situations, no guarantee,
no silver bullets here.
Getting bigger clearly doesn't necessarily put you
in the profit zone and I think some
of the things we mentioned earlier, there's investments,
there's costs, there's labor,
and there's sales plans and all those things
have to come together in the right way to drive
a maple business into profitability.
Now, at the bottom, I do have the bulk profit margin.
We had -1% and the retail 1%.
Very close numbers here.
Really right on the fringe there on 2020.
I think there's some people that did well,
some people not so well.
I'm gonna make a note here.
In 2020, people were pulling in revenue
from the recovery programs, the CFAT program,
and for this study,
we actually withdrew government-related income.
It's not syrup-related income.
So, anything that wasn't directly related to syrup sales,
we did pull out of the equation.
So, in some cases,
these businesses may have cash flowed just fine
'cause they got a check from the government,
but the syrup business
on their own didn't necessarily cut it.
Okay. Some takeaways from the benchmark here.
Marketing strategies are a significant driver
of the variable costs.
We've got a few businesses that certainly look
at retail, wholesale blends.
They're doin' different sales activity.
These sales activities add labor.
They add costs, first and foremost.
I know that the literature, the agricultural literature,
specifically often talks about adding value,
which is terrific.
I think it's important as a cost manager
to realize these activities add costs first.
It requires labor and time to execute a direct online
or wholesale, retail marketing strategy.
Those costs get incurred and then we've gotta find a way
to price and we've gotta find a way to move enough product
to make good on those.
We certainly see that high labor costs
with intense marketing strategies, yield strategies,
high-yield producers like we showed earlier here,
we can produce a lot of syrup per tap.
It will drive investments up.
It will drive investments up and I think
this is a classic for business managers, humans in general.
Some people, whether they've got capital, equity to invest,
or they're really less concerned on risk, the idea of debt,
the idea of borrowing, some people are investors,
other people are doers,
They're workers and they'd rather put time in it.
They'd rather have their hands on things.
Certainly, marketing is its own skillset,
but I see some divergence there.
I do see some people
that are definitely more investment-minded,
investment-driven, and other people
that are a little bit more operational and saying,
"I wanna put my time into this or I just don't have the half
a million dollars to invest in that scale."
So, they're gonna run a business differently.
Couple more takeaways.
Profitability we looked at just at the end there.
Profitability is not always directly related
to low production costs or scale of the operation.
There's a real connection across the whole system,
which is gonna be costs and revenue and how they integrate.
So, just having a low cost of production or just being
at a large scale
does not necessarily make you profitable at all.
So, from a management perspective, what are you gotta do?
You've really gotta go back
to that cost analysis we talked about earlier.
Gotta find a way to understand your costs,
understand your model.
Is it an investment model? Is it a heavy labor model?
Understand that cost structure and then pair
the ideal revenue generation with that,
the ideal price setting,
the ideal marketing plan and sales forecast,
to bring in the revenue need,
pay down that cost of production,
and then ideally have some margin left.
Okay, cost versus revenue.
A couple things related to sales plans
'cause sales are important.
Sales are important to finances.
These are some things I've seen with the bulk producers.
We've already talked about emphasis on yield per tap, right?
We don't wanna leave any sugar in the woods.
We wanna get it out, get it through our lines,
and get it converted into sap.
We've got bulk producers that are definitely looking
at the option to purchase sap.
You've heard me say this over and over again,
the idea of bringing in some extra sap,
running it through your system,
can certainly spread some more
of those fixed costs over more units produced.
So, the idea of bringing in sap
to increase sales, great strategy.
And then always there are people with creative solutions
to move just a small fraction
of their crop at higher prices.
First off, well, let me just say,
certified organic premiums, yes, plus 10,
plus 20 cents per pound, a great strategy.
That's gonna reprice your whole crop.
So, that's the whole thing,
but that idea of just finding a restaurant,
finding a low intensity outlet where you
can move some syrup retail can be a dramatic shift
for even a large business.
The key with all of that, anytime you bring on marketing,
the key there is to really be mindful of your costs.
Figure out what the costs are gonna be in order to figure
out if that extra marketing effort is worth it.
Yeah, good question.
So, Andy asked, "Would you say that below 3000 tap syrup
has shown not profitable?"
Quick answer, not necessarily.
Would you say below 2,500 tap sap
has not shown to be profitable? Not necessarily.
The reason that we've really kind
of steered away from that, couple of reasons.
I do think there's challenges.
I do think that there are some significant challenges
when you're at that scale, 1,000, 2,000,
3,000 taps because you are gonna be heavily invested
and generally, at that point,
the family and the volunteers sometimes
become less interested or they do trail out
after a little while and you're left with a lot to manage
and maybe having to give up more of your paid time
at another job or possibly pay some people to help out.
I have definitely seen two
and 3000 tap enterprises be profitable,
profitable in the sense that it's generally
a part-time income, complimentary enterprise
to someone who's generating some money in other directions.
The other reason we've steered away
from the smaller enterprises is we found, in a good way,
there's so much creativity
and there's so much uniqueness at small scales.
I don't necessarily see those models as being replicable
from my job in the university.
Part of the job that I feel is important
is to find agricultural models that we can,
I don't wanna say train everyone on,
but we can show that there's some patterns
and there's some trends and there's so much creativity
at the small scale that I love to leave
that to the entrepreneurial world.
I'd love to leave that to,
for people to figure out what to do with that, you know?
How can you get 150,
$200 per gallon equivalent from syrup at a small scale?
Can you turn that into a 50, $80,000 business?
And I've seen people do it, for sure.
So, I'm not trying to steer people away
from those smaller scale models,
but I will say that they're unique and they're,
I think they're often difficult to,
I'd say, quote, like, replicate.
So, great question. Definitely a great question.
I think you can run those as a viable part-time enterprise.
One of the reasons we have gone
to larger business models for this,
the benchmarking research particularly,
is from a rural development perspective,
we know that there are a lot of people lookin'
for meaningful livelihood, meaning more than, like,
a very fractional part-time job.
Being in rural communities,
not everyone's got opportunities for other employment.
So, we are trying to get a better sense
of those business models that can,
could return maybe $30,000 a year back
to the owner manager or more.
So, that's another reason where you'll see a lot
of the projects I'm on gearing towards some
of the larger tap enterprises.
Oh, so, we mentioned the bulk strategies.
This is the strategy that we've been advocating from
for people that are doing retail or wholesale.
We've got this pricing and sales forecasting calculator.
I've had a lot of fun teaching classes
with this with people.
I'll wait now and see who's on the line,
but I can certainly go on and do an example if people want,
but in this calculator,
you can go and basically put a theoretical crop value in
and you can determine if you wanna do bulk sales only,
if you wanna do bulk sales and retail and wholesale,
or just retail and wholesale.
So, getting away from the cost side here,
now we're getting the sale side,
being able to itemize how many packages
at what price you wanna sell.
It's been great in our classes.
We, you know, set challenges up and said to people,
"Show us, you know,
show us how you can get to $110 per gallon equivalent."
Or, "Here's a cost structure where,
if you can get
to $80 per gallon equivalent across your crop,
you're gonna cover your cost and break even.
So, I highly recommend it.
If anyone watchin' the video or watchin' live tonight
is doing retail, go to www.maplemanager.org,
put in your crop, and start to deal it out in half points
at a certain price, quarts at a certain price.
I think we've got, like,
over 15 package sizes built into the calculator.
You can set the package size, set the price,
and look at a total sales forecast.
Top right there, you're gonna go to unit one,
pick your pint, set your price,
specify how many gallons you're gonna sell.
Unit two and you can keep adding more and more units there
until you utilize that whole crop.
Get yourself a good high-blended price, then ask yourself,
how am I gonna develop the marketing plan
to execute all those sales?
That's what I've got tonight, I think. Yep.
Couple of photos there. Chris Lindgren in there, top left.
He'll be doing a sap presentation,
sap business presentation next week.
I'm gonna open it up. Great.
Well, if we've got no questions,
certainly thanks to those that came live tonight.
Hopefully, we'll have some people watching the video.
Have a great evening. Keep an eye out.
We've got a couple more UVM Extension projects comin' up,
webinar next week,
and then we're gonna be in a conference season.
So, some of you may see UVM Extension specialists in Ohio
or out in Wisconsin and potentially, or obviously,
the Vermont Conference is comin' up.
All right, thanks a lot, everyone.
Have a good evening.