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Author Topic: Simple Business Modeling??  (Read 8129 times)
Tucker1
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« on: March 17, 2010, 10:31:58 AM »

Assuming that you wanted to move from hobbyist to a small scale side-liner (35 - 55 hives), it seems you need have some basic information at hand to determine if you could really make any money at it. Is it fair to say that:

A) Sale price of honey is about $4.50 pound on average.

B) Average Hive yield is about 70 pounds/year.   (Assuming some large year to year variations)

C) Average expense for a new fully functional hive is $155/hive.   (You assemble/paint/etc.)

D) Hives fully depreciate in about 6 years.

E) Simple extraction/bottle equipment cost is about $2,800.  (Assuming new equipment, 45 hives))

F) Feed/Medical Treatment cost per hive average $20/year.

G) Farmer Market Stall Rental  is $300.00/Season.

I understand this model excludes all labor costs.

Is this a fair assessment ?  Does anyone have a more complete model they are willing to share?


Regards,
Tucker1

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doak
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« Reply #1 on: March 17, 2010, 04:10:44 PM »

The first one I would strike out is (B).
If you average 70 lbs. annual per hive you are doing something that has never been done.
Do you have documentation of anyone getting that yield on average each year  in several consecutive years? I would like to see it. Would also like to see their way of operation.
(G) why pay that much for a rental stall. There are other contact methods that cost 0.
(D) questionable? I still have some of my original boxes and they are just as solid as in 2001.
(E) $$$   seems a little steep for a simple operation.
(F) Completely out of the ball park either way.

All that said I don't have a model. :)doak
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Tucker1
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« Reply #2 on: March 17, 2010, 05:50:18 PM »

Thanks, Doak:  Here is some information I was able to obtain from the USDA about honey production for regions 4 & 5.  The sample size was fairly small. The yield is less, as you indicated.  Looking at other USDA regions, I found the yield levels higher.

 The survey results out of 30 respondents.


USDA Zone 4 23% (7)
USDA Zone 5 77% (23)

What races did you keep this season?

Italian. Apis mellifera ligustica. 60% (18)
Carniolans. Apis mellifera carnica. 50% (15)
Russian. 23% (7)
Buckfasts. (mixture of several) 7% (2)
Feral (mutts of unknown origin that appear to have been wild for some time). 27% (Cool
Other 7% (2)

What was the main hobby or commercial objective?

Producing Honey 67% (20)
Producing Wax 3% (1)
Rearing Queens 3% (1)
Making more bees by Splitting, making Nucs, making Packages 17% (5)
Other 10% (3)

What was the number of hives in permanent bee yards?
1 – 4 hives 33% (10)
5 – 10 hives 33% (10)
11 – 20 hives 17% (5)
21 – 40 hives 7% (2)
41 – 80 hives 3% (1)
81 – 160 hives 0% (0)
161 – 320 hives 3% (1)
Other 3% (1)

What was the number of hives in migratory operation?

Not applicable. I keep all hives in permanent bee yards. 97% (29)
81 – 160 hives 3% (1)

What was the average honey yield per hive?

Not applicable. Honey production was not the main objective this season. 7% (2)
None harvested 20% (6)
Average per hive yield up to 20 lbs 10% (3)
Average per hive yield 21 – 40 lbs 10% (3)
Average per hive yield 41 – 60 lbs 20% (6)
Average per hive yield 61 – 80 lbs 10% (3)
Average per hive yield 81 – 100 lbs 13% (4)
Average per hive yield 101 – 120 lbs 7% (2)
Average per hive yield 121 – 140 lbs 0% (0)
Average per hive yield 141 – 160 lbs 3% (1)

I need to do more research on the average yields.  I'm not confident in what I'm seeing (either way).

Regards,
Tucker1
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Tucker1
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« Reply #3 on: March 22, 2010, 02:01:16 PM »

Hi Doak:  I was able to find this additional piece of information about ave. hive yields in Ag Weekly.
http://www.agweekly.com/articles/2010/03/12/commodities/crop/crop63.txt

"Honey production in 2009 from producers with five or more colonies totaled 144 million pounds, down 12 percent from 2008. There were 2.46 million colonies producing honey in 2009, up 5 percent from 2008. Yield per colony averaged 58.5 pounds, down 16 percent from the 69.9 pounds in 2008, and is the lowest yield since 1989. Colonies which produced honey in more than one State were counted in each State where the honey was produced. Therefore, yields per colony may be understated, but total production would not be impacted. Colonies were not included if honey was not harvested. Producer honey stocks were 37.2 million pounds on December 15, 2009, down 27 percent from a year earlier. Stocks held by producers exclude those held under the commodity loan program."

Unfortunately, the ave hive yield in my part of the country is in the mid 40'ies.  Too bad.

Regards,
Tucker1
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doak
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« Reply #4 on: March 22, 2010, 06:14:35 PM »

I suppose on a selected basis I could probably do O.K.

Say if I had 20 colonies and I checked each one when harvest time came.
If I find one with less than a medium super full of honey I don't touch it.

Other wise I have 1000 colonies and 8 employee's. They harvest the honey but don't keep up with how many colonies they did not take honey from. I have to average up the total by 1000 colonies. Get my drift.


I had a total of 12 colonies about 4 years ago. I harvested around 400 pounds from (7) colonies.
Now I'll let you do the math. Average from 12 then from 7.

Don't forget. The 5 that didn't have honey cost the same as the other 7. I would not have spent any extra on supers cause I already had those.
Go figure. :)doak
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David LaFerney
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« Reply #5 on: March 22, 2010, 09:28:42 PM »

You should talk to your local inspector or county agent.  They might have what you are looking for.  I think that for me I would have to keep at it for a few years - while pursuing a goal of making money at it - and establish a base line of what I am able to average with my skill or lack thereof.  What someone else can do is immaterial.  Heck, you might be able to do a sight better than average.  Or of course a lot worse. 

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Tucker1
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« Reply #6 on: March 24, 2010, 10:16:11 AM »

Doak:  Your point is well made. It's all about how you do the math. (Lies, darn lies and statistics).

I guess I'm just trying to see how I can really make a buck producing honey on a small scale. It's something that seems attractive when I enter retirement. I just don't want to invest any serious money (Think of a poor ole guy, with two or three nickels.) and not get any real return on the investment.

I guess it's just my nature to see if it makes any sense on paper, before I get serious.

Regards,
Tucker1
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doak
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« Reply #7 on: March 25, 2010, 11:08:55 AM »

I sold $500 worth at whole sale about 3 years ago. That was the year I had honey running out my ears. rolleyes
As of right now any I sale at retail is mostly profit because all my equipment has long been paid for.
If you maintain 30 or 40 colonies, after a couple years you have sold enough to recover your initial lay out.
Then is when you will realize a little. I have 4 quarts sold for Sat. pickup at $9 a quart. After 3 or 4 years I took my sign down. They keep coming back

You will not have to have each colony yield 50 to 70 pounds to do OK.
If you have 40 colonies and average your over all harvest and come up with 400 pounds, that's 10 pound per colony X $4.50 or $5. per pound. Not bad for a few hours of work.

100 colonies is considered full time for one person.

May not recover the layout the first couple years. Cannot get "quick rich" either. Only way to do that is win the lottery. rolleyes :)doak
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Tucker1
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« Reply #8 on: March 25, 2010, 04:04:47 PM »

Doak & David:  Thanks again for the  replies.  The info is encouraging. Hopefully, I can do a little "side-lining" and not end up declaring chapter 11.

We have a local bee keeping club in our area, plus WSU (Washington State University) has a professor (Dr. Shepard) that specializes in honey bee research; hopefully I can get some additional information about local yields.

I was reading an article recently on fall hive management and found this comment.

"We have used a 3 deep brood box method of beekeeping for approx 15 years and while it sounds expensive on equipment, it has other savings worth much more than a brood box. We haven't had to feed sugar to our bees since the change over to 3 boxes, a massive saving on cost and time. It is now 12 years since our last swarm, and our honey crop each year is staggering, average last year of 215 lbs, and apart from putting three old queens into winter last year, which we shouldn't have done but wanted to save their genetics, we haven't lost a hive to winter kill for the last 19 years. I believe our record speaks for it's self, our methods do work and we would recommend 'Fall Management' as a way to go."

http://www.beeworks.com/informationcentre/fall_management.html

Here again, it depends on how the numbers are calculated.  If  I'm understanding the article correctly, I've got a long long way to go, before I come anywhere near these numbers.  I don't think I'll live long enough. ......

Thanks again.

Regards,
Tucker1
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David LaFerney
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« Reply #9 on: March 25, 2010, 06:08:46 PM »


You will not have to have each colony yield 50 to 70 pounds to do OK.
If you have 40 colonies and average your over all harvest and come up with 400 pounds, that's 10 pound per colony X $4.50 or $5. per pound. Not bad for a few hours of work.

100 colonies is considered full time for one person.

May not recover the layout the first couple years. Cannot get "quick rich" either. Only way to do that is win the lottery. rolleyes :)doak

How many hours of work are you talking to maintain 40 colonies?

You know you can double your chances of winning power ball?  Buy two tickets.
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doak
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« Reply #10 on: March 25, 2010, 09:01:21 PM »

Enough about the lottery shocked rolleyes
Some people may spend more time per colony than others. Some colonies will take more time than others.
How you harvest your honey will differ in time. Extract, crush&strain, comb honey.
I would say there is not a solid number for hours spent per colony.
The way it is with me I don't have a punch clock job. I am retired. So I spend my time on what is needed when it is needed, sometime. That puts me in the position so I can let one thing go to do another.
If that is how the ball bounces, Or, let the chips fall where the will. Some time I do what has to be done when it has to be done. If not it doesn't get done. I'm done with this one now. Wink :)doak
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organicfarmer
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« Reply #11 on: March 27, 2010, 09:43:16 AM »

What was the average honey yield per hive?

Not applicable. Honey production was not the main objective this season. 7% (2)
None harvested 20% (6)
Average per hive yield up to 20 lbs 10% (3)
Average per hive yield 21 – 40 lbs 10% (3)
Average per hive yield 41 – 60 lbs 20% (6)
Average per hive yield 61 – 80 lbs 10% (3)
Average per hive yield 81 – 100 lbs 13% (4)
Average per hive yield 101 – 120 lbs 7% (2)
Average per hive yield 121 – 140 lbs 0% (0)
Average per hive yield 141 – 160 lbs 3% (1)

If my calculation are right that is an average of 44 lbs, far from 70. Moreover it is self reporting (we all know what it means; i for sure like to brag a little, just human) so forgetting those hive who don't produce to calculate average boost numbers. It is also on a small number (representative sample?)
in the region of northeast, average is around 50 lbs with wide variation state to state, within a state. Last year i did zip and had to feed like crazy !!! worst year i have seen in 20 yrs.
in a business plan, i'd be a little more conservative on production, income stuff and err on side of caution as well evaluating costs on higher side and going up faster than sale price, of course !?! That way you may come out happily surprised instead of disappointed.

i have also heard of 3 deep overwintering with opening broodnest, expanding and managing that way; i am going toward that to experiment. Wont cost too much and see if it could produce more in long run. i am also attracted to what Walt Wright has to say on nectar and swarm management.
Good luck on your expansion.
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doak
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« Reply #12 on: April 24, 2010, 11:49:30 AM »

I would have to think that over wintering would have to do with the population going into the fall. If you have one deep of population, add one deep of food stores. What role does the third deep play going into the winter. If it is a two deep population then that's a different story. In other words, Why excess space with no purpose? Regardless of population going into the winter, it is what you have to work with when the Queen starts to increase and what rate of increase she does come spring. :)doak
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BeePuncher
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« Reply #13 on: July 15, 2010, 10:44:05 AM »


You will not have to have each colony yield 50 to 70 pounds to do OK.
If you have 40 colonies and average your over all harvest and come up with 400 pounds, that's 10 pound per colony X $4.50 or $5. per pound. Not bad for a few hours of work.

100 colonies is considered full time for one person.

Hi there, hope no one minds me bringing up an older post, I'm new here and am catching up with some reading! Can't figure how you think a hundred colonies is full time for one person (it's not) while managing forty colonies for a poor honey yield is a few hours of work, and not bad at that? Seems contradictory, no?
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AliciaH
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« Reply #14 on: July 22, 2010, 01:19:12 PM »

It all comes down to how realistic one is about time, yes?  I know that I take longer to inspect that many because if I'm hurried, I miss things.  So, for me, 50 hives would be full-time.  My thinking on that is hive inspections/maintenance would be 1/2-time for me and general equipment maintenance, business, bookwork, extraction, etc., would take up the other 1/2-time.

Of course, that's all only a theory.  I don't have 50 hives yet and we all know what they say about "best laid plans...." Smiley
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vermmy35
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« Reply #15 on: July 22, 2010, 06:32:20 PM »

Tucker1 it sounds to me like you are trying to put a business plan together.  If thats the case I would put three different harvest models into it.  One best case, worst case and most likely case for harvesting.  Also you need to make sure you are putting all your variable cost into it like: jars, labels, and lid's.  Plus your fixed costs which would be rent, taxes, product liability insurance etc.  My undergrad degree is Accounting so just get a hold of me if you have any questions; since their really a lot more that goes into it than you would think.  Just remember that Business Plans can be anywhere from 10 to 25 pages and the more detail the more you are likely to succeed.

Norm   
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Tucker1
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« Reply #16 on: August 04, 2010, 04:43:22 PM »

Vermmy35:  You're right, I'm trying to draft up some type of business plan. I won't be asking anyone for money and I would be completely self funding.  If I can convince myself it will really work on paper and provide some sort of reasonable return (and enjoyment), I'd like to do this when I retire or perhaps a bit sooner. I was hoping that someone on the forum could give me some sort of simple model/template that I could use to "run the numbers", before I did any real serious work. As you can see, there is some debate about expected yields (no surprise there).

I appreciate all of the help I've gotten so far. The picture is far from complete. The more questions I ask and get answered ...... the more questions I ask.

Thanks for the reply. I can use the support.

Regards,
Tucker1
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CountryBee
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« Reply #17 on: August 04, 2010, 06:05:17 PM »

You can always make money, you just have to have 1- a place,way to sell the honey and 2- always watch your expenses.  That is it. period.
If I were you I would start very small and build it up a little every year from some of my surplus income money from the honey sales.  Start selling honey now.  If you have hives, learn to build supers, bases and all woodenware and how to make splits.  Then you are playing with "house money" not your money!  Watch "grapes of wrath" talk to livefreeordie, he thinks like me.  Don't get a loan for a business.  You start a business to make money not take money from you.  Read about the great depression, how people made stuff work or did without.  You can do it!  Good luck my friend! Country Smiley
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Elle
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« Reply #18 on: August 14, 2010, 04:48:12 PM »

Hi Folks.  This is something that appeals to me, too.  Keep in mind I DON'T HAVE ANY BEES YET.  Sheesh.

But here's my 2 cents.  Be sure you factor in your cost of jars and labels and whatnot.  I don't think I saw that in there. 

Since you are in Pullman, gas may or may not be a factor as you travel to drop of the golden goodness.  Things are kind of far apart over there, aren't they?

Consider selling honey at farmer's markets (they have them on this side of the state) and also those little fruit stands.  I noticed one of the farmer's markets has a guy selling honey, and that means he has to set up and then sit there for the 4 hours of the market.  I don't think he sells more than a few jars, and that mostly to me because I try to be supportive.  And there is a fruit stand my kids used to work at, some other guy has his honey there:  so he doesn't have to watch the honey, their employee takes care of sales.

Just a couple of ideas for you.  I'm very interested in this.  I don't want to buy a truck and haul the wee beasies around to pollinate, though.  Maybe a smaller truck with just a couple of hives to pick up and drop off, um, I guess I could handle that.

Also, since you are in Washington, do you know if one needs a commercial kitchen or food handler's license or whatnot?  I haven't found that out yet but still haven't been to my local beek meeting:  not until September.

Thanks.

Elle
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winginit
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« Reply #19 on: August 25, 2010, 08:41:19 AM »

Since you have depreciation in your assumptions, I assume you have figured in the applicable tax rates. Keep in mind that your social security, retirement, interest income, and minimum IRA distributions will be fully taxable, so use the tax rate for the NEXT dollar that comes in (e.g. the highest tax bracket you expect to attain in retirement).  You can write off some other stuff, too. Office supplies (you're already using paper, toner, files, etc), bank fees (all those bounced checks from customers), mileage (to sell the honey), etc.

I think the bottles and anything used up right away (sugar?) will not be depreciated, by the way. They should be expensed in the year purchased. Technically, they would be expensed in the year you sell the honey but don't worry about that in your modeling.

Where did you come up with 6 year depreciable life? Is that an IRS determination? Is that MACRs? Usually, you'll want to use MACRs depreciation. fyi--developing depreciation tables in Excel is always a pain if you have many levels of depreciation (different depreciable lives and new depreciable assets every year).

Caveat--I'm not a tax accountant, and this should not be construed as or used for tax or accounting advice.

But I have done hundreds of pro formas (income statement projections for imaginary businesses). I find that keeping it simple is the best approach. If you pay an Investment Banker $1,000,000, they will take 5 pages of financials and turn it into 500 pages of gobbledy-gook and try to make you feel stupid under their superior stares. Hey, they have to prove their worth somehow, right?

Rule of thumb is that you almost never earn the returns that you project...so project high!   grin
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