My small farm seems to make money, but I never count my own and my family's labour. How should I value our labour to know the true profit?
To know the true profit of a small farm you must count your own and your family's labour as a cost, otherwise the farm only looks profitable because you are working for free. The common way is to value family labour at the local hired labour wage rate for the days actually worked, and include it among your costs. If after paying yourselves a fair wage the farm still shows a profit, it is genuinely profitable; if not, the income is really just disguised wages, which is useful to know when comparing crops or deciding whether to lease more land. This does not mean small farming is not worth it, but honest accounting helps you choose higher return crops and decide where hiring or mechanising is cheaper than family time. Track labour days per crop along with other costs.
When I started valuing our family labour at the local wage rate, I saw one crop was just paying us back our own work and nothing more. It changed what I grow. Without counting your labour the farm only looks profitable because you work for free.
A balanced view: counting family labour is right for comparing crops, but do not let a low figure discourage you completely. On a small farm part of the value is that it employs the family at home when there is no other work nearby. I count the labour to choose better crops, yet I also accept the farm is partly a livelihood, not only a profit machine. Use the honest number to improve, not to give up.
Counting our labour honestly is also what pushed me to mechanise the heavy jobs. Once I saw how many family days went into one crop valued at the local wage, hiring a thresher and a sprayer turned out cheaper than our own time, which we could use on a second crop. The number guides where a machine pays.
When I started counting our family labour at the local wage, I saw one crop was just paying us back our own work and nothing more. It changed what I grow. Honest labour costing is eye opening.
I track labour days per crop along with seed, fertiliser and other costs, then value those days at the hired wage. If the farm still shows a profit after paying ourselves a fair wage, it is genuinely profitable. This honest costing also showed me where hiring a machine beats family time.
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