Cash flow is the true measure of sustainability in urban agriculture

In recent years, the term “sustainability” has become jargon to describe the complexity of criterion for the value judgments of the urban farm producer.

Ask ten people to define the term “sustainable,” as it relates to agriculture in urban environments, you are likely to hear ten different descriptions for the term. You will however hear several themes related to people, the environment, as it relates to the farm business. The risk for the urban farm operator comes when applying to much emphasis on any one aspect causing a negative impact on cash flow. The true acid test of sustainability comes down to the ability of the farm operator to financially continue. Cash flow is the “blood pressure” of the business of urban farming, and without cash you cannot continue in business. 

The typical urban farm business is small sized and has difficulty generating revenue that will allow the producer to pay the essentials of debt service, recapitalization, family living and cover adversity. Placing additional self-imposed sustainability burdens on the farm makes positive cash flow more difficult to achieve. If the farm cannot cover these essentials, the farm is not truly sustainable as a business. Both the long-term strategy and the day-to-day decisions related to the operator’s view of sustainability, ultimately impact cash flow. Taking cash from other sources and using to pay for farm expenses masks the weakness in farm sustainability. If farming decisions cause the farm to run out of cash, the farm cannot continue. 

Many people for instance, would agree that providing funds for employee professional development, for example paying cost of training seminars, is a good example of sustainable business practice because the business is making an investment in the personal development of the employee. Suppose though, the cash flow is rather tight and the allocation of funds used for development of the employee causes a supplier to have a delayed payment of debt, or the business just absconds on the debt. Reasonable people may conclude that the business is not truly sustainable, even though they hold themselves out to actually be sustainable. 

Every urban farmer and every urban farm business will have a strategy that will match the values of the farmer. The operator must be aware that focusing on complex definitions of sustainability will affect cash flow, and if not properly managed, may potentially force the farmer from out of business. By focusing on generating and improving cash flow, the farm business become more sustainable, and the farmer can add appropriate enhancements to improve other aspects of sustainability when it becomes affordable. 

If you are interested in pursuing an urban agriculture venture, educators at Michigan State University Extension and innovation counselors at the Michigan State University Product Center can assist potential businesses in the establishment of good practices to improve business effectiveness. For further information and assistance with employee communications please contact your local Michigan State University Extension office. 

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