The first 5 months of 2024 have been ahead of projections and expectations. Whereas revenues from produce sales to wholesalers have been more or less on target (5% variation) in terms of unit price, our volume, even after taking into consideration the increase in production, has been higher than anticipated.
What has proved to be far more profitable is our transformation business. My wife and I both agree that we are at the edge of economies of scale, we have tripled production with almost no additional capital expenditure, so our marginal production costs have dropped by almost 40%.
However, the free ride is over, in five of our six transformation businesses, the next stage of growth would require rather heavy capital expenditure. Our dilemma is that neither we nor our partners are very enthusiastic about following that next step.
The question then becomes is stagnation in sales a negative issue? Is the only measure of success the annual increase in revenues and profits? In three businesses, our partners have indicated that they would rather keep the business at its current size, in the other two the decision has not been made. the last business still has about a 50% level of slack.
Even on the farm, the 21 high tunnels are enough. The size of our herd is just about right, our milk production is levelling off after we increased the size of both herds (Goats and Cows).
It becomes a philosophical question, and we have more or less answered it already. We will continue to invest to maintain and optimize our physical plant, but we are satisfied with its size. We consider that with 1,200 acres of land, our farm has extracted about 80% of the economies of scale benefits, but the risk of growing the business to extract the rest is probably not worth the effort.
Our return on capital is substantially above projection, which means that our employees will certainly see a substantial bonus this summer. As we share our outperformance with our biggest asset -- our team. I know it sounds cliche "our team" but we back this up with tangible action and real benefits to our employees.
Note: Please do not contact me about employment, as of June 1, 2024. All our employment needs are met locally. Moreover, we have no openings at this time, and do not anticipate having any until the end of 2024
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