Looking for an agriculture farm business plan? You're in the right place.
A farm lender or investor asks questions a template rarely answers. How much cash does the farm need before the first crop is sold? Which months lose money? What happens when a buyer takes less than the contract said, or a season runs short?
This article walks through a complete sample plan for a botanical herb farm near Memphis, Tennessee, from the one-page summary to the five-year financials, so you can see how a seasonal grower puts numbers behind a crop calendar.
Here is what the plan gives you to work from:
- The farm in brief: see how to fit the land, crops, buyers and funding request on one page
- The three kinds of buyer: learn how to describe supplement makers, extractors and nurseries so each one sees a reason to order
- The crop calendar: spot when each planting turns into cash, including the root crops that take three seasons
- The season-by-season first year: find the months that lose money before you reach them, and size the reserve to match
- The five-year profit and loss, cash flow and balance sheet: see how acreage, hires and pay raises show up in the figures
- The poor-sales case: have an answer ready for a 20% revenue shortfall, with the steps the owner would take
The farm is fictional. Replace its acreage, prices and buyers with figures you can support.
In this plan
To turn this example into your own agriculture farm business plan, use the agriculture farm business plan template.
The Farm in Brief
Harbor Terrace is a botanical herb farm on leased land in Fayette County, about 35 miles east of Memphis, Tennessee. It grows medicinal and culinary herbs and sells them three ways: dried herb to dietary supplement makers, fresh-cut herb to extractors who process it within a day, and potted starts to independent nurseries and garden centers. From Year 2 it adds dried roots. Renata Okafor founded the farm and runs it.
The farm raises $375,000: $120,000 from Renata, $105,000 from a retired herb broker and a $150,000 farm credit term loan. Equipment takes $157,000, legal work, licenses and launch marketing take $18,000, and $200,000 is held as a reserve.
| Year 1 | Year 2 | Year 3 | |
|---|---|---|---|
| Revenue | $167,800 | $335,000 | $480,000 |
| Net income after start-up costs | ($109,943) | ($30,427) | $14,933 |
| Closing cash | $95,543 | $41,367 | $35,277 |
Year 1 sells in two main windows: potted starts from March to June, and dried and fresh herb from June to December. Revenue is about $13,983 a month on average against $20,883 a month needed to cover operating costs, so the first year loses money. Year 2 nearly closes the gap and still loses $30,427 after interest and depreciation, and Year 3 is the first profit.
The plan also tests a bad stretch. If every revenue line comes in 20% under plan and the owner delays and drops hires, halves growth equipment spending, cuts marketing and her own pay and stops adding leased space, cash stays positive in every year.
Buyers get named crops with a lot number, a lab report on each lot and one grower to call.
The Farm and Its Fields
Legal name: Harbor Terrace, LLC, a Tennessee limited liability company that has elected corporate tax treatment. Owners: Renata Okafor, 53%; a retired herb broker, 47%. Land: about 14 acres of leased field in Fayette County, rising to 34 acres leased by Year 5, on a ten-year lease with renewal options. Buildings: a leased 3,200 square foot shed with a drying room and two heated greenhouses built on the property. Start date: January 1, 2027, in time to seed for the March nursery sales.
Purpose
Grow a small set of medicinal herbs well, document every lot, and sell to buyers who want to know which field their plants came from.
Crops and what each is for
| Crop | Product | Buyer | First sales |
|---|---|---|---|
| Lemon balm, holy basil, calendula | Dried leaf and flower; fresh-cut | Supplement makers and extractors | June 2027 |
| Echinacea tops | Dried and fresh-cut | Supplement makers and extractors | 2028 |
| Ashwagandha | Dried root | Supplement makers | Fall 2028 |
| Echinacea root | Dried root | Supplement makers | Fall 2029 |
| Potted herbs, 4-inch and 1-gallon | Live plants | Nurseries and garden centers | March 2027 |
Goals
- Reach 16 cropped acres in 2028 and 22 in 2029.
- Sign six supplement-maker contracts in the first season, four of them by June.
- Be profitable after tax by the third year.
- Keep any one buyer under a quarter of revenue.
Licenses and registrations
Selling nursery stock in Tennessee is expected to need a state nursery certificate. The farm budgets $3,500 for that, a business license and the fees buyers charge to qualify a new supplier. Current requirements, and workers' compensation rules for seasonal farm staff, are listed in the Sources section.
The Botanical Market
Demand for herbs
The American Botanical Council reported that retail sales of herbal dietary supplements in the United States rose 4.4% in 2023 (HerbalGram, issue 141). That is retail sales of finished products, and a grower sees only a small share of that value. It indicates that finished-product demand is steady, which is what contract buying depends on.
Who competes for the same order
| Alternative | What it offers | Why a buyer chooses it | Where Harbor Terrace differs |
|---|---|---|---|
| Overseas bulk suppliers and brokers | Large volumes of dried herb at low prices | Price and volume | A named domestic farm, lot records and short freight |
| Large US contract growers | Scale and certification | Reliable supply | Smaller minimums and one grower to call |
| Wholesale nurseries and growers of ornamentals | Wide plant catalogs | One-stop ordering | Medicinal species that a general nursery rarely carries |
| Other small herb farms in the region | Similar crops | Local relationships | Drying and testing in-house |
Prices are not quoted. They change by species, grade and season, and each seller publishes its own.
SWOT
| Strengths | Weaknesses |
|---|---|
| Founder with thirteen years in nursery and herb production | Year 1 loses money and draws on the reserve |
| In-house drying and a lab report on each lot | Two crops, tops and roots, depend on a single drying room |
| Three sales channels that peak in different months | Greenhouse space caps the nursery line |
| Opportunities | Threats |
|---|---|
| Buyers who want domestic, traceable plant material | Cheaper imported herb |
| Echinacea and ashwagandha roots from Year 3 | A wet summer that delays drying |
| Nurseries wanting medicinal species in 4-inch pots | A supplement maker cutting an order |
Three Kinds of Buyer
Supplement makers
Brands and contract manufacturers that turn dried herb into capsules, teas and tinctures. They order in bulk and typically test for identity and contaminants before approving a supplier. Qualification can take months, which is why the farm sends samples from a trial plot before opening. Payment terms are 30 days from delivery.
Extractors
Processors that make liquid extracts and need herb within a day of cutting. They care about freshness and the time between cutting and delivery. A cutting day is planned around their pickup window.
Nurseries and garden centers
Independent garden centers and landscape nurseries restock in spring and again in September. They buy in trays of 4-inch pots and sell to home growers. They pay on delivery or on 45 days.
What makes a buyer move
A failed lab report, a late shipment or an unanswered call. One named grower is the farm's answer to each.
Winning Accounts
From inquiry to purchase order
Sample lots from the 2026 trial plot go to supplement makers over the winter, followed by a call within a week. The maker orders a trial lot, tests it and signs a seasonal contract if it passes. Extractors are won by a trial cut on a fixed day. Nurseries order from a spring catalog and a price sheet.
Year 1 accounts
| Buyer type | Accounts | Average per account | Year 1 revenue |
|---|---|---|---|
| Supplement makers | 6 | $12,800 | $77,000 |
| Extractors | 3 | $11,700 | $35,000 |
| Nurseries and garden centers | 22 | $2,500 | $55,800 |
By Year 3 the model holds about 9 supplement makers, 4 extractors and 30 nurseries. Pricing is set per pound for herb and per pot for starts, and rises about 3% a year from Year 2 for returning buyers.
Getting Noticed by Buyers
What the budget buys
Year 1 marketing is $15,000: $9,000 of launch spend paid from start-up funds and $6,000 of running costs. Across about 31 accounts that is about $484 per account. The share of revenue falls from 3.6% in running costs in Year 1 to 1.7% in Year 3.
| Item | Year 1 spend | Purpose |
|---|---|---|
| Sample kits (launch) | $3,500 | Trial-plot lots with a lab report, sent to supplement makers |
| Trade-show booth (launch) | $3,500 | One regional natural-products show, aimed at makers and extractors |
| Website and lot-record pages (launch) | $2,000 | Crop list, availability, lab reports on request |
| Nursery catalog and mailing | $2,500 | Spring and September price sheets to garden centers |
| Buyer visits and field days | $2,000 | Farm tours for makers and extractors in July |
| Directory listings | $1,500 | Domestic-sourcing supplier directories |
Milestones
- March 2027: first potted starts delivered.
- June 2027: first dried lots sold under four signed supplement contracts.
- October 2027: six supplement contracts and three extractor accounts active.
- Spring 2028: ashwagandha sown and a second field hand hired.
From Seed to Shipment
The crop calendar
January to February: seed in the greenhouses. March to May: ship potted starts, transplant to the field. June to October: cut, dry and ship herb. November: last cuts, field cleanup. December: orders, lab reports and bed preparation.
Drying and quality
Cut herb goes straight to the drying room, where dehumidified racks bring it to storage moisture. Each lot gets a number, a drying record and a lab report for identity and contaminants, sent to a third-party lab. The farm budgets $7,500 for testing and certification in Year 1, about 20 lots at $375.
Capacity
The model holds revenue to what the land and the drying room can carry. Cropped acres rise from 10 in Year 1 to 30 in Year 5. Revenue per cropped acre outside the nursery is about $11,000 in Year 1 and about $17,000 in Year 3. The drying room sets the ceiling, and a third rack and a second storage bay are paid for from cash flow in the growth equipment line.
Equipment
A used 55-horsepower tractor with a bed shaper and transplanter, a well pump and drip lines for the first 14 acres, two heated greenhouses, the drying room with a cutter and destemmer, a used pickup and trailer and a walk-in cooler. Growth equipment of $68,000 over Years 2 to 5 covers irrigation to the added acres, a root lifter and washer, a third drying rack and a second storage bay.
Insurance
General liability, product liability for herbs sold into the supplement supply chain, property coverage on the shed and equipment, and farm vehicle coverage, $6,500 in Year 1.
Who Runs the Farm
Renata Okafor, founder and head grower
Renata spent nine years at a wholesale nursery in the Memphis area, rising to production manager, then four years growing contract herbs for an extractor. She holds a degree in horticulture. Her $120,000 is her savings from those years.
Where the team is thin
Renata has not run a business before and has not negotiated a supplement contract. The retired herb broker, who holds 44%, reviews the first contracts. The operations and accounts manager hired in month 30 takes on invoicing and lab paperwork so Renata can stay in the field.
The investor and the lender
The retired broker holds 47% and reviews results with Renata every quarter. He receives no distributions in the first five years, and the owners agreement lets either owner request a buyout valuation from Year 6. The farm credit loan carries a personal guarantee from Renata, a lien on the equipment and, through a landlord agreement, on the improvements, with quarterly accounts due to the lender. The LLC has elected corporate tax treatment.
Numbers for Five Seasons
Everything in this section is produced by one five-year model, monthly through the first year and in annual blocks after that. The inputs and the reasons for them come first. The tables follow in the order a lender reads them.
Equipment, land and the first-harvest reserve
| Use of funds | Amount |
|---|---|
| Used 55-horsepower tractor, bed shaper and transplanter | $34,000 |
| Two 30 by 96 foot heated greenhouses with benches | $41,000 |
| Well pump, drip lines and filtration for 14 acres | $20,000 |
| Drying room with two dehumidified racks, cutter and destemmer | $38,000 |
| Used pickup, trailer and walk-in cooler | $24,000 |
| Nursery certificate, business license, buyer-qualification and registration fees | $3,500 |
| Legal: land lease, supply contract template, entity | $5,500 |
| Launch: sample kits, trade-show booth, website | $9,000 |
| Cash reserve to carry the farm until the first harvest is paid | $200,000 |
| Total uses | $375,000 |
| Source of funds | Amount |
|---|---|
| Renata Okafor's savings | $120,000 |
| Equity from a retired herb broker | $105,000 |
| Farm credit term loan | $150,000 |
| Total sources | $375,000 |
Renata Okafor puts in $120,000, 53% of the equity. A retired herb broker adds $105,000 and holds the other 47%. A farm credit lender provides a $150,000 ten-year term loan at 9.0%, interest only for the first 12 months. It is secured on the tractor, truck, trailer and cooler, with a lien on the greenhouses, irrigation and drying room that the landlord has agreed to under a ten-year lease with renewal options. The rate is a figure for this example and not a quoted rate. The LLC has elected to be taxed as a corporation. Of the $375,000 total, $157,000 buys equipment, $18,000 pays for legal work, licenses and launch marketing, and $200,000 is held back as a reserve. The reserve is more than half the raise because Year 1 uses $122,457 of operating cash and Year 2 a further $42,839, and the loan starts amortizing in Year 2 before the farm turns a profit. The broker receives no distributions in the first five years, and the owners agreement lets either owner request a buyout valuation from Year 6.
Where the figures come from
- Land and buildings are leased on a ten-year term. Year 1 rent of $17,500 covers a 3,200 square foot shed with a drying room and about 14 acres of field. Leased land rises to 20, 26, 30 and 34 acres over Years 2 to 5, and a second storage bay is added in Year 2. Rent reaches $31,000 in Year 5.
- Cropped acres are 10 in Year 1, 16 in Year 2, 22 in Year 3, 26 in Year 4 and 30 in Year 5. Excluding potted starts, revenue per cropped acre is about $11,000 in Year 1 (a first-year crop with partial cuts), $15,000 in Year 2, $17,000 in Year 3, $18,000 in Year 4 and $17,000 in Year 5. Those are the plan's figures and depend on species, yield and price.
- The plan prices dried herb at about $13 a pound across lemon balm, holy basil, calendula and, from Year 2, echinacea tops, so Year 1 sales of $77,000 mean about 5,900 pounds. Fresh-cut herb is priced at about $2.60 a pound, about 13,500 pounds in Year 1. The farm grew a one-acre trial plot in 2026 to produce sample lots for buyer qualification.
- Potted starts sell in two sizes. Year 1 is about 9,800 four-inch pots at $4.20 and 1,620 one-gallon pots at $9, sold to about 22 independent garden centers and landscape nurseries. Greenhouse space limits this line, which is why it grows 61% in Year 2 and then 8 to 20% a year.
- The root line starts in Year 2 with ashwagandha, an annual dug in the fall. Echinacea sown in spring 2027 is not dug until fall 2029, so the root line steps up in Year 3. Until then the echinacea beds earn only the tops cut from them, from Year 2.
- Year 1 ends with about 31 accounts: six supplement makers on dried-herb contracts averaging about $12,800, three extractors averaging about $11,700 and 22 nurseries averaging about $2,500. Four of the six supplement contracts are signed by June. By Year 3 the model holds roughly 9 supplement accounts, 4 extractors and 30 nurseries. No account is planned to exceed a quarter of revenue.
- Receivables average 32 days, because supplement makers pay on 30-day terms and nurseries pay on delivery or on 45 days. Inventory held at year end is 10% of annual sales, which covers dried herb waiting for a shipment and nursery stock in pots. Suppliers are paid in 25 days.
- Payroll adds 27% to wages for payroll taxes, health coverage and a retirement match. Seasonal field and greenhouse staff carry 30% to reflect the workers' compensation class for farm and nursery work, and the part-time dryer technician carries 15%. Pay raises of 3% a year are charged as a separate line from Year 2.
- Direct costs average 25% of revenue. Potted starts run at 30% (plugs, pots, media, trays), dried herb at 24% (seed, compost, bags, freight), fresh-cut herb at 18% (crates and hauling) and roots at 22%. Lab testing is a separate line: $7,500 in Year 1, about 20 lots at $375, rising to $13,500 by Year 5.
- Growth equipment is budgeted as an operating line, $18,000 in Year 2, $22,000 in Year 3, $20,000 in Year 4 and $8,000 in Year 5, for irrigation to the extra acres, a root lifter and washer, a third drying rack and a second storage bay build-out. It is expensed in the year spent and not depreciated, which lowers reported profit.
- Tax is charged at the 21% federal corporate rate and a 6.5% Tennessee rate, with the first two years' losses carried forward and start-up costs not deducted. Farm entities can be treated differently, so the rates are placeholders. No distributions are paid in any year, because the loan, the reserve and the Year 2 loss come first.
Revenue by buyer type
| Revenue stream | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Potted herb starts to nurseries | $55,800 | $90,000 | $108,000 | $122,000 | $132,000 |
| Dried herb to supplement makers | $77,000 | $150,000 | $205,000 | $245,000 | $275,000 |
| Fresh-cut herb to extractors | $35,000 | $75,000 | $105,000 | $125,000 | $140,000 |
| Dried roots (ashwagandha, then echinacea) | $0 | $20,000 | $62,000 | $90,000 | $105,000 |
| Total revenue | $167,800 | $335,000 | $480,000 | $582,000 | $652,000 |
| Growth on prior year | – | 100% | 43% | 21% | 12% |
Dried herb is the base: 46% of Year 1 revenue and 42% of Year 5, with volumes that recur each season. Potted starts are a third of Year 1 and a fifth of Year 5, because greenhouse space caps them. Fresh-cut herb holds at about a fifth of revenue. Roots reach 16% of Year 5 and cannot be sped up, since echinacea needs three seasons.
The first twelve months, season by season
| Month | Potted herb starts to nurseries | Dried herb to supplement makers | Fresh-cut herb to extractors | Dried roots (ashwagandha, then echinacea) | Total revenue | EBITDA |
|---|---|---|---|---|---|---|
| Jan 2027 | $0 | $0 | $0 | $0 | $0 | ($15,716) |
| Feb 2027 | $0 | $0 | $0 | $0 | $0 | ($15,716) |
| Mar 2027 | $6,500 | $0 | $0 | $0 | $6,500 | ($10,824) |
| Apr 2027 | $21,000 | $0 | $0 | $0 | $21,000 | $88 |
| May 2027 | $18,500 | $0 | $0 | $0 | $18,500 | ($1,793) |
| Jun 2027 | $6,500 | $5,000 | $0 | $0 | $11,500 | ($7,061) |
| Jul 2027 | $0 | $11,000 | $4,000 | $0 | $15,000 | ($4,427) |
| Aug 2027 | $0 | $14,000 | $8,000 | $0 | $22,000 | $841 |
| Sep 2027 | $2,200 | $15,000 | $10,000 | $0 | $27,200 | $4,754 |
| Oct 2027 | $1,100 | $17,000 | $9,000 | $0 | $27,100 | $4,679 |
| Nov 2027 | $0 | $11,000 | $4,000 | $0 | $15,000 | ($4,427) |
| Dec 2027 | $0 | $4,000 | $0 | $0 | $4,000 | ($12,706) |
This table spreads payroll and overhead evenly across the twelve months, so the monthly loss is the same in January and February even though the greenhouse technician starts in February. In practice the spring and summer months carry a few thousand dollars more payroll than the average, and November and December carry less. On that basis EBITDA is negative in every month from January to July, positive in August, September and October, and negative again in November and December. Nursery sales carry March to June, dried herb runs from June to December and fresh-cut herb from July to November. The farm has no income in January and February, when seed is started and the first nursery orders are being prepared.
Crew and payroll
| Role | Annual wage | Starts | Year 1 end | Year 2 end | Year 3 end | Year 4 end | Year 5 end |
|---|---|---|---|---|---|---|---|
| Founder and head grower | $52,000 | Month 1 | 1 | 1 | 1 | 1 | 1 |
| Greenhouse technician (full time, February to June) | $37,000 | Month 2 | – | – | – | – | – |
| Field hand (full time, April to October) | $37,000 | Month 4 | – | – | – | – | – |
| Drying and quality technician (part time, June to November) | $26,000 | Month 6 | – | – | – | – | – |
| Second field hand (full time, April to October) | $37,000 | Month 16 | – | – | – | – | – |
| Operations and accounts manager | $52,000 | Month 30 | – | – | 1 | 1 | 1 |
| Harvest crew member (full time, June to October) | $37,000 | Month 42 | – | – | – | – | – |
| Total payroll incl. on-costs | $129,090 | $157,148 | $195,672 | $243,230 | $243,230 |
Renata is the only full-time year-round worker in Year 1. A greenhouse technician works February to June of every year, a field hand April to October, and a part-time technician runs the dryer from June to November. Those seasonal roles show as blank in the year-end columns because they are off payroll in December. A second field hand joins in month 16, the operations and accounts manager in month 30, which takes order handling, invoicing and lab paperwork off Renata, and a harvest crew member in month 42. Average headcount is about 2.3 full-time equivalents in Year 1 and 3.4 in Year 3, and June of Year 3 is the peak at 5.5. Renata's $52,000 salary is already in the costs, so profit means what is left after she is paid.
Profit and loss
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $167,800 | $335,000 | $480,000 | $582,000 | $652,000 |
| Direct costs (pots, plugs, compost, packaging, lab lots, freight) | ($41,520) | ($82,892) | ($118,770) | ($144,009) | ($161,329) |
| Gross profit | $126,280 | $252,108 | $361,230 | $437,991 | $490,671 |
| Payroll incl. on-costs | ($129,090) | ($157,148) | ($195,672) | ($243,230) | ($243,230) |
| Rent | ($17,500) | ($21,500) | ($27,000) | ($29,500) | ($31,000) |
| Utilities | ($9,500) | ($11,500) | ($13,000) | ($14,000) | ($14,500) |
| Marketing | ($6,000) | ($7,000) | ($8,000) | ($8,500) | ($9,000) |
| Insurance | ($6,500) | ($7,500) | ($8,500) | ($9,000) | ($9,500) |
| Professional fees | ($4,000) | ($4,500) | ($5,000) | ($5,500) | ($5,500) |
| Software subscriptions | ($1,500) | ($1,800) | ($2,200) | ($2,400) | ($2,600) |
| Fuel, repairs and field supplies | ($6,500) | ($9,000) | ($11,500) | ($13,000) | ($14,000) |
| Lab testing, certification and inspection fees | ($7,500) | ($9,500) | ($11,500) | ($12,500) | ($13,500) |
| Equipment replacement and expansion (irrigation, root handling, third drying rack) | $0 | ($18,000) | ($22,000) | ($20,000) | ($8,000) |
| Bad debt allowance | ($500) | ($1,200) | ($1,900) | ($2,200) | ($2,400) |
| Annual pay raises (3% a year) | $0 | ($4,714) | ($11,916) | ($22,554) | ($30,528) |
| EBITDA | ($62,310) | ($1,254) | $43,042 | $55,607 | $106,913 |
| Depreciation | ($16,133) | ($16,133) | ($16,133) | ($16,133) | ($16,133) |
| Interest | ($13,500) | ($13,040) | ($11,976) | ($10,813) | ($9,541) |
| Income tax | $0 | $0 | $0 | $0 | ($643) |
| Net income before start-up costs | ($91,943) | ($30,427) | $14,933 | $28,661 | $80,595 |
| Start-up costs expensed at opening (legal, licensing, launch marketing) | ($18,000) | $0 | $0 | $0 | $0 |
| Net income after start-up costs | ($109,943) | ($30,427) | $14,933 | $28,661 | $80,595 |
Year 1 loses $91,943 before start-up costs and $109,943 after them, with payroll at 77% of revenue. Year 2 is a smaller loss of $30,427. Year 3 is the first profitable year at $14,933, and Years 4 and 5 add $28,661 and $80,595. EBITDA margin moves from negative 0.4% in Year 2 to 9.0% in Year 3 and 9.6% in Year 4, held back by growth equipment, the harvest crew member and accumulated pay raises, then reaches 16.4% in Year 5 as equipment spending falls. Income tax is zero until Year 5 because the early losses are carried forward.
Cash movements
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Cash from operations | ($122,457) | ($42,839) | $6,311 | $27,381 | $84,778 |
| Equipment and build-out | ($157,000) | $0 | $0 | $0 | $0 |
| Funding received | $375,000 | $0 | $0 | $0 | $0 |
| Loan principal repaid | $0 | ($11,337) | ($12,401) | ($13,564) | ($14,837) |
| Owner distributions | $0 | $0 | $0 | $0 | $0 |
| Net change in cash | $95,543 | ($54,176) | ($6,090) | $13,816 | $69,941 |
| Closing cash | $95,543 | $41,367 | $35,277 | $49,093 | $119,035 |
Closing cash is positive at every year end. It falls from $95,543 at the end of Year 1 to $35,277 at the end of Year 3, the lowest year-end figure, then builds to $119,035 in Year 5 with no distributions. Only year-end figures are shown, and the lowest point inside a year will be lower, probably in early spring before nursery orders are paid.
Balance sheet
| At year end | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| Cash | $95,543 | $41,367 | $35,277 | $49,093 | $119,035 |
| Accounts receivable | $14,711 | $29,370 | $42,082 | $51,025 | $57,162 |
| Inventory | $16,780 | $33,500 | $48,000 | $58,200 | $65,200 |
| Equipment and build-out (net) | $140,867 | $124,733 | $108,600 | $92,467 | $76,333 |
| Total assets | $267,901 | $228,970 | $233,959 | $250,785 | $317,730 |
| Accounts payable | $2,844 | $5,678 | $8,135 | $9,864 | $11,050 |
| Bank loan | $150,000 | $138,663 | $126,262 | $112,698 | $97,861 |
| Paid-in capital | $225,000 | $225,000 | $225,000 | $225,000 | $225,000 |
| Retained earnings | ($109,943) | ($140,370) | ($125,438) | ($96,777) | ($16,181) |
| Total liabilities and equity | $267,901 | $228,970 | $233,959 | $250,785 | $317,730 |
Coverage, margins and break-even
| Measure | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 |
|---|---|---|---|---|---|
| EBITDA margin | -37.1% | -0.4% | 9.0% | 9.6% | 16.4% |
| Net margin (before start-up costs) | -54.8% | -9.1% | 3.1% | 4.9% | 12.4% |
| Payroll incl. pay raises as share of revenue | 77% | 48% | 43% | 46% | 42% |
| Revenue per full-time equivalent at year end | $167,800 | $335,000 | $240,000 | $291,000 | $326,000 |
| Average monthly revenue | $13,983 | $27,917 | $40,000 | $48,500 | $54,333 |
| Monthly revenue needed to cover operating costs | $20,883 | $28,056 | $35,234 | $42,342 | $42,495 |
| Debt service cover (EBITDA / interest + principal) | -4.6x | -0.1x | 1.8x | 2.3x | 4.4x |
The last two rows compare what the farm sells with what it needs. Year 1 averages $13,983 a month against $20,883 needed. Year 2 is still just short, at $27,917 against $28,056. Year 3 clears the line with $40,000 against $35,234. Debt service cover is negative in Years 1 and 2, meaning operating profit does not cover interest and principal and the reserve fills the gap, then 1.8x in Year 3 and 4.4x in Year 5. The revenue-per-FTE row counts year-end headcount, when seasonal staff are off payroll, and overstates revenue per person. On average headcount, revenue per full-time equivalent is about $75,000 in Year 1 and $141,000 in Year 3.
A poor-sales case: every revenue line 20% lower
| Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | |
|---|---|---|---|---|---|
| Revenue | $134,240 | $268,000 | $384,000 | $465,600 | $521,600 |
| Net income before start-up costs | ($106,943) | ($36,234) | ($1,709) | $16,453 | $16,551 |
| Net income after start-up costs | ($124,943) | ($36,234) | ($1,709) | $16,453 | $16,551 |
| Closing cash | $86,556 | $32,566 | $15,032 | $20,296 | $28,702 |
This case cuts every revenue line by 20% in every year, while direct costs fall by only 10%, because seed, plugs and lab lots are spent before the shortfall is known. The response: the operations manager and the second field hand each start a year later, the harvest crew member is dropped, growth equipment spending is halved in Years 2 and 3 and stopped after that, marketing is cut by 20%, Renata takes a 20% pay cut and leased space stops growing apart from 3% increases. With those steps the farm ends every year with cash in the bank, at no less than $15,032. It loses money in Years 1 to 3 and earns a small profit in Years 4 and 5. Equity at the end of Year 1 is $100,057. Without the response, the same shortfall takes cash below zero in Year 2, at about negative $34,700, and the loss deepens in later years.
Sources
- American Botanical Council, herbal supplement sales growth of 4.4% in 2023, as reported by NutraIngredients-USA. The report itself is in HerbalGram issue 141. Secondary reports disagree on the dollar total, so none is quoted.
- Tennessee excise tax rate of 6.5% on net earnings: KPMG on Tennessee franchise and excise tax, a secondary source. The Tennessee Department of Revenue publishes the current rate, and farm entities may be treated differently.
- Nursery certificate rules (Tennessee Department of Agriculture), workers' compensation for farm employers (Tennessee Department of Labor and Workforce Development) and supplier qualification requirements vary by case and are not quoted here. Each is set by its own agency or buyer.
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