If you're considering adding a new enterprise, or making an investment in an existing enterprise, a partial budget gives you a structured way to look at the financial impacts. With this tool, you look at the expected increases in income and decreases in expenses for the proposed change, compared to decreases in income and increases in expenses. This will help you decide how much you can invest, and the impacts on other parts of the business.
Interest on Equity
Good questions to ask yourself:
- Can you borrow money without paying interest?
- Do you have an "opportunity" put your money somewhere else?
- Do you want to earn interest/dividends on your money in the stock market?
- Shouldn't you earn interest on the money invested in your farm?
- Plan to pay yourself 3% minimum on your equity invested in the farm!!
Value of Labor and Management
- What is the value of your efforts on the farm?
- What is the "opportunity" for you to work elsewhere?
- A simple charge for your efforts will help find a value to help us evaluate your business
- What could you earn if you worked elsewhere in a similar job?