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My farm income spreadsheet is worth $1.50/lb.
8 February 2010


Dan Bricklin Not many people remember VisiCalc but I do.  I remember trying it out, just to see what all the fuss was about.  After playing with it for a few minutes I grew bored and went back to my computer games.  I was still in high school at the time so I didn't quite grasp how important keeping accurate accounting records can be to a company.  I have since learned that being able to wrangle a spreadsheet is a skill all good business owners should have.

VisiCalc is generally considered to be the first real spreadsheet application.  I once saw an interview with the two creators of VisiCalc.  After writing the first version they had a hunch that they were onto something big but they still weren't quite sure how big.  So they decided to find an accountant and give a demonstration of their freshly created software gizmo.

The accountant watched passively as the authors entered a large table of data into the computer.  Since computer mice hadn't been invented yet, everything was entered using esoteric keyboard commands and viewed on a tiny monochrome monitor.  Certainly the accountant was thinking that a pencil and large sheet of graph paper would be far easier than having to type everything into that clunky metal box.

Then, once all the data was entered, the authors went back and modified a value at the top of the table.  The changes automatically propagated down all the appropriate rows and columns, updating dozens of cascading sums and nested products almost instantly.  The accountant blinked in disbelief.

"How'd you do that?" he asked incredulously.  The authors changed the value back and everything automatically corrected itself, returning to their original values.  Then they changed a different column and the spreadsheet once again updated itself.

The accountant started to stammer and shake.  What the computer had done in a split second was normally a tedious process of erasing, manipulating and rewriting a series of sequential values, hoping to not make any mistakes in the process.  The computer had done it instantly and flawlessly.

Apple "That's what I do all day!" exclaimed the accountant.  It was instant love.  The accountant realized immediately what a huge time saver this new invention would be.  Indeed, VisiCalc went on to become the first "killer app", an application so compelling that people would buy a computer just to use that one application.  In this case, VisiCalc was a major contributor to the success of the Apple II, the computer that rocketed Steve Jobs and Steve Wozniak to eternal fame.

Income Today, anybody with a table of data to manipulate probably uses Microsoft Excel.  I used Excel to make a fancy spreadsheet showing "Potential Income from Kona Coffee Farming."  It shows numbers for a hypothetical 5 acre Kona coffee farm.  At 13 acres, Kona Earth is larger than most other Kona coffee farms.  The spreadsheet works fine either way since the numbers are all adjustable.  I have seen similar spreadsheets made by other farmers and even a very detailed one made by a university economics professor.  Of course mine is better than any of them.

When working with a large spreadsheet it's easy to get too busy adding up all the numbers and miss the forest for the trees.  I tried to avoid this by concentrating less on the details of various expenses and more on the big picture.  The coffee farming expenses are lumped into a few simple slots while the various "value added" expenses (such as taking cherry to roasted coffee) are spread across several different sections:  cherry, parchment, green, roasted, mixed.  A quick view of the spreadsheet makes it painfully obvious that it's nearly impossible to make a profit from farming alone.

The line that looks the most enticing is the potential income from selling all the coffee at retail prices, directly to the consumer.  While this is a worthy goal, few farms can achieve it.  Most farms, including Kona Earth, sell a mixture of retail, wholesale and unprocessed coffee cherry.  That's why I added the last section in the spreadsheet that shows income when selling coffee at all the various stages.  This is an important section that I've never seen in any other Kona coffee farming spreadsheet.

Another item that is often omitted is the cost of expanding.  When I first considered buying a Kona coffee farm, I did some quick math on potential income.  I got to that bottom line, showing the potential income from all retail sales, and was pretty happy.  Then I did one other quick calculation:  the amount of coffee I'd have to sell every day in order to achieve that income.  The answer I got was 20 pounds per day.  At that level, I wouldn't have any time to farm because I'd spend all my time bagging and selling coffee.  It was an important figure that I knew my spreadsheet had to have.

There's another common omission that has always bothered me in other spreadsheets and that's the equivalent cherry price.  For example, I recently saw someone selling "Kona" green beans on EBay for $6 per pound.  That is a ridiculously low price.  Consulting my spreadsheet, I can easily see that they are actually losing $1.50 per pound compared to the equivalent cherry price.  They would be better off selling the raw coffee cherry to the local mill rather than spending all the time and money required to turn it into green beans.  That EBay seller is either really bad at math or they're not selling fresh 100% Kona coffee.  Assuming they're not liars, then maybe they should ask me for a copy of my spreadsheet.  I'd be happy to help them with the basics.


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