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Do you know your costs? Competitive pricing? Business Fundamentals Accounting, Legal, Banking

Challenges of Commercial Beekeeping Presented by Ray Civitts Mountain Sweet Honey Company Toccoa, GA. Topics. Do you know your costs? Competitive pricing? Business Fundamentals Accounting, Legal, Banking Honey Sales Bee Supply Q/A. Cost of Sales - Honey. How do I figure my costs?

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Do you know your costs? Competitive pricing? Business Fundamentals Accounting, Legal, Banking

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  1. Challenges of Commercial Beekeeping Presented by Ray Civitts Mountain Sweet Honey CompanyToccoa, GA

  2. Topics Do you know your costs? Competitive pricing? Business Fundamentals Accounting, Legal, Banking Honey Sales Bee Supply Q/A

  3. Cost of Sales - Honey How do I figure my costs? 1. Figure your cost of each sale a. Individual jar cost (plus freight costs) b. Sugar water supplement in off-season c. Mite treatment costs d. Your labor costs Let’s do the math! Case of jars from XYZ Jar mfg is $12.00. There are 12 jars in a case. - $6.00 case/12 jars in the case= $.50 - Label $.15 x 5,000 = $750.00 Sugar costs – 37.5 lbs to feed bees in the off-season. Your cost is $.37 per lbs. - 37.5 lbs x $.37= $13.87

  4. Cost of Sales - Honey Labor - Have to figure the labor making sugar water - Field feeding $12.00 hr x 40 work hours = $480 per week x 10 weeks = $4,800.00 Lodging costs - Set-up - Supers placed - Supers pulled $12.00 hr x 40 hrs x 5 men = $2,400 week $60.00 per night x 100 nights (based on 5 guys @ 20 stays) = $6,000

  5. Cost of Sales - Honey Mite Treatment - Cost per treatment can be figured by strip or treatment. $2.95 per strip x 2 per hive x 3 treatments = $17.70 x 300 hives= $5310.00 - Labor for mite treatment $12.00 per hour x 40 hours x 3 weeks = $1,440.00 + $144.00 Employer Tax 10% = $1,584.00 Mite Treatment Costs = $6894.00

  6. Cost of Sales - Honey Bottling Costs - Labor $12.00 hr x 40 hours x 3 employees x 6 weeks= $8,640.00 Delivery - $.055 cents per mile - $0.55 x 2,000 miles = $1,100.00 - Labor $12.00 x 15 hours x 26 weeks = $4,680.00 Advertising - $3,000.00 per year

  7. Cost of Sales - Honey Overhead costs Storage - $650.00 per month x 12 months = $7,800.00 Electric - $100.00 per month x 12 months = $1,200.00 Water - $30.00 per month x 12 months = $360.00 Maintenance - $75.00 per month x 12 months = $900.00 Frames & Foundation - $2.85 x 10 frame super / 7 year = $4.07 x 900 total supers = $3,663.00 What are my costs based on 1,600 gallons of honey?

  8. True Cost of Sales - Honey Calculation for 6,400 Quart Jars - Quart jars with label - $ .65 - Feeding costs - $2.48 - Lodging costs - $1.31 - Mite treatment - $1.01 - Bottling Costs - $1.35 - Delivery - $ .73 - Advertising - $ .46 - Overhead Costs - $2.18 Total costs - $10.17 Profit Margin based at 30% - $3.05 Total sale price - $13.22

  9. Profitability • Let’s look at the total profit • 30% profit yielded a annual profit of $19,520.00 • - Based on a sale price of $13.22 per quart • 35% profit yielded a annual profit of $22,720.00 • - Based on a sale price of $13.72 per quart • 40% profit yielded a annual profit of $26,048.00 • - Based on a sale price of $14.24 per quart • Examples of bad pricing - • Wholesale price - $8.79 • - net loss $8,832.00 • Must reduce expenses • Sell the business - Bankruptcy

  10. Why is accounting important? • Yes it is a necessary expense! • - You are able to identify trends • - Expose losses before they impact your future • - Know how successful you are in the current year • - One or more items are hot sellers • - Taxes – don’t get caught! • - Eliminate guessing! • - More bankable

  11. Why is an attorney important? • Internet legalities • - Credit card purchases • - Charge backs • - Terms and Conditions • - Bulk honey purchases • - Pollenation Services Agreements • - Property leases • A good attorney will save you time and future expenses. • Be legally incorporated • Partnership agreements • Corporate By-Laws

  12. Why is a banking relationship important? • Most banks do not understand honey bees let alone • - Commercial Beekeeping • - Extracting • - Seasonal business model for income • Ask questions to the loan officer • - What is his lending authority? • - Does he sit as a voting member on the credit committee • - Do not start a relationship with a junior lender. • - Commercial lending part of the bank • - Vice President - $10k - $150k • - Sr. Vice President - $150k - $250K • - Executive Vice President – up to $500k • - President - $750k to $2M

  13. Banking Let’s talk loan details - Traditional loan up to 7 years - SBA Loan up to 7 years equipment - 25 years on real estate - USDA loan - Community Development loan – Start-up’s - You have to have tax returns to prove your income - Financial Statements above $100k loan You may be required to provide sales projections Get your loan officer out to see your operation. Educate them!

  14. Honey Sales Do we ever have enough honey? - Supplier arrangements - Specialty honey’s are the hardest - Friendships do help - Annual increases of 15% upward - Bouncing prices $2.10 to $4.00 lbs. - Pepper to Sourwood These arrangements are trending toward cash on delivery - Some pay a higher price per pound to carry the payment to a later date. - If you do not know your source you are at risk! - Advocate (1) Cash, (2) Blended arrangement, (3) payment over time.

  15. Bee Supply Start small – Many, many reasons - Quality - Weather conditions (5 weeks of rain) - Started in our garage Start with producing nucs. - Figure your costs? - Use your old frames and foundation? - There is an art of making nucs.

  16. Bee Supply Package sales - Takes 500+ hives to be able to shake enough bees for package sales at any volume. - Competitive market Lessons Learned - Start Small and have several mentors - Learn commercial beekeeping practices - Sell top quality only - Don’t cut corners * Wood boxes vs cardboard boxes * Poor queens * Queen provider quality - Customer pick-up (Hive box or shipping box)

  17. What we learned Planning is a must (8 months prior to entry) Know your costs before you figure your sell price What is the cash requirement in going to the next level? What are the labor requirements for this next step? Have great accounting Know your market Do you have the skills or will you sub-contract it out?

  18. What we learned Quality is a must in all aspects Lining up suppliers a year in advance Know your selling cycles Contact Information Bank Services: United Community Bank Cornelia, GA Bee Supply & Honey business Located in Toccoa, GA Website: MountainSweetHoney.com

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