Friday, July 31, 2015

"there is no labor cost to us..."

Walter Jefferies has been building his butcher shop for a very long time.  So long in fact that I had to go back and look to see when he first started working on it -- in April of 2008.  

7+ years later he's got the building in some sort of shape, but hasn't finished what I consider to be the most important stuff -- the food-handling documentation that allows your facility to be licensed,   His schedule lists that as being done in winter of 2008 -- and a 7 year slip is a long, long time.  

He could be licensed by either by state or federal agencies but apparently hasn't finished the required paperwork.    On the project, Mr. Jefferies does put up schedules every couple of years, and then slips the dates on them.  It's a bit reminiscent of a sofware project, actually. 

He's at least 3 years behind where he thought he would be in this project is what it looks like to me.  
An except from Mr. Jefferies schedule for this project.  Snapshop taken 7-31-2015

In a comment about the work he's put into it, he talks about the expenses so far:  

"Basically we spent about $56K on concrete and about $120K or so on other materials. There is about $30K in equipment. There is no labor cost to us since we did all of the construction in our own time and I did all of the engineering and architecture. That is a rough accounting of costs of construction at about $206K for the building. Sometime I’ll do a detailed cost breakdown. " -- Walter Jefferies on his butcher shop

Couple of things; the building itself only has one floor; it might be taller than usual, but there's no second story; so what he's done so far has cost him $128 square foot in construction costs; and by my measure that's a pretty high price to pay considering labor costs for construction usually run more than 40% of the total project cost.  (With labor added, he's paying $180.00 a square foot.  that's an expensive building!)

   A 40x40 pole barn, concrete floors and washable walls, floor drains and so on, would have cost him around $50k.  

And the difference between $50k and $206k, $150k, will probably never be paid off by savings on heating or cooling costs, at least not in Mr. Jefferies likely farming lifetime.  Maybe his grandchildren will break even.   or great -grandchildren 

But the real cost that he's ignoring is that this building has consumed all of his time for the last 7 going on 8 years, and he considers that to be worthless time.  

I think the other way about this stuff.  I always figure labor costs at $15/hour  -- which is higher than typical farmhand pay around here, but if I do it that way, and it pencils out, I can afford to pay someone to do the work in my stead.  

If you're running a farm you have a lot of different demands on your time -- some of the time you can schedule, some you can't (like when its sunny enough to make hay) -- and time that isn't devoted to something, for me anyway, is pretty precious.  It's very difficult for me to make time to leave the farm, for instance.  

It's been interesting watching him work on this project, and it reminds me that when I think about this sort of thing that I should probably run it by cooler heads to make sure that it makes sense.   I'm not convinced that this direction gets him to where he wants to go as fast as other choices he could have made.  

Note:  I've donated money to Mr. Jefferies and solicited donations for Mr. Jefferies to complete this project.  I think it would be great if it does work out for him.  

keywords:  sugar mountain farm, butcher shop, walter jefferies, USDA slaughter


Rich said...

It's always seemed to me that his on-farm one-of-a-kind butcher shop is pretty similar to building an expensive piece of infrastructure like a hog barn on a farm.

A lot of money was spent on a single purpose structure that has to be used no matter what to get any sort of return on the money spent. He or his children can't easily change course now and decide to do something else in the future with the farm because they have so much invested financially and emotionally in this multi-year project.

The way I see it, they won't ever be able to sell the building, it can't be used for anything else but a butcher shop, and building maintenance or upgrading of systems is likely to be a nightmare in twenty years or so. The only thing in their favor is that at least they don't have a massive loan obligation like a hog barn would have, so it might be a little easier financially to walk away from the project.

Besides all that, I still don't understand what the advantage was to having such a complicated building design, there must be easier ways to save on energy costs.

Bruce King said...

One thing that has bothered me about this project is that it's not really a butcher shop. It's a slaughter facility, but there's no retail space or chance for it in the forseeable future. So "butcher shop" doesn't really fit very well - most folks think of a retail space when they think of butcher shop.

If we take this $206k and divide it by the profit he likely makes per pig - lets say $300 net -- he's going to have to process 693 pigs before he gets his money back, and that's just the principal amount. if he'd taken that same amount of cash and put it into an investment, he'd have gotten a return, and it's reasonable to say that the lost opportunity counts as an expense, too. at 6% return, that $206k would have turned into $369k -- and at that rate he will never, ever get his money back. He could have put the money in the bank, waited ten years, and hired the whole thing done in 6 months.

Right now his operation transports a maximum of 5 pigs a week to slaughter. At that rate, it will be more than 10 years before he breaks even on the construction costs. The saving of a couple of hundred dollars a month in heating or cooling costs is not really an issue at this point.

rain said...

Not everything is about money, Bruce. Walter obviously enjoys the planning and the building aspect of a project like this. Most people pay more than that for their houses, and don't even enjoy living in them for eight years, much less fuel their dreams with their creation. And Rich, what's wrong with complicated? Easy is not more fun.

Bruce King said...

Rain, Walter explained his reasoning for building the butcher shop, and it was about money, and time. His wife has to spend hours each week driving, and he wanted to reduce that labor. he also wanted more of the dollars per sale of each animal to stay on his farm. Both of those are great reasons to do this sort of project.

But the way that he's chosen to attempt this is much harder than alternative ways would have been, has cost him more, and honestly, for the past 7 years, hasn't saved him or his wife an hour of work.

So measured by his own goals, this wasn't the best way to get there -- I'm glad that he's got the meat cutting rooms in shape to use them, but his original goal was USDA inspection, and that appears to be at least 3 years behind walters own schedule.

Sometimes its not about money. this time it was.

grasspunk said...

"Dream" is such a dangerous word in farming. It tends to hide bad ideas from common sense.

rain said...

I don't know, Bruce, but being a voyeur of Walter's journey, I feel like it's possible to read between the lines and see that facing the challenge of the butcher shop experiment is as much the point as the time and money savings. Pitting yourself and your resources against a challenge seems to be half the fun of farming, and reading about how you guys are tackling such big challenges is what makes it fun to follow. Was he three years behind, or did he get an extra three years of enjoyment?

How could someone with a cool moniker like grasspunk prefer common sense over dreams!?