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Why We Use $/Sq.Ft./Day for Cultivation KPI
Calculate $/ft2/day for each cycle and cultivar, associate the outcome changes with their causes, then do whatever is required to further increase $/ft2/day. If a cheaper input (e.g. fertilizer) decreases price or yield - you can easily lose much more revenue than you saved in OpEx.
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Cultivators who have an understanding of these 2 key financial dynamics in cultivation will make far better financial decisions for their grow than those who do not.
1. Optimizing Gross Revenue per Square Foot per Day ($/ft2/day) and how to use this metric as a key decision making tool.
2. Cost of Goods (COGs) Analysis: Which expenses are worth further optimization vs expenses where optimization can cause net losses.
In this article, we will cover how to calculate and make cultivation decisions with this KPI $/ft2/day.
Optimizing Gross Revenue per Square Foot per Day
The Fundamental Metric: $/ft2/day
HOW TO CALCULATE $/FT2/DAY
Cultivators should prioritize decisions based on the metric of revenue per square foot per day. $ per area per day equation - Multiply price by yield and divide by days in your harvest cycle.
This metric is a composite of three critical elements:
• The wholesale price per pound of processed flower
• Yield in grams/ft²/harvest
• Harvest duration
EXAMPLE CALCULATION :
• Average Wholesale Price / lb: $1500
• Days / Harvest: 63 days Yield / ft²: 80 grams
3. [ ($ / lb) x ( yield in g/ft2 / 454 g/lb ) / (cycle days)) ] = $ / ft2 / day [($1500 / lb) x (80 grams/ft² / 454 grams/lb) / 63 days] = $4.20/ft²/day
This metric encapsulates the key variables of wholesale price, yield per area, and harvest duration. Overemphasis on any single factor can be counterproductive if it compromises the composite total.
Batch Tracking Cultivation Variables
It’s crucial to track this metric across different cultivars and batches, correlating it with cultivation variables. We refer to this as “Batch Tracking”. This will help you investigate what works and what doesn’t. Some cultivation variables to note in each batch include:
• cultivar selection
• input adjustments
• substrate
• fertilizer and additives
• methodology variations
• technology
• lighting
• irrigation and fertigation strategies
• substrate management
• pruning, etc.
Dynamics That Affect Revenue
If you accept that this metric is sufficient for decision making, it follows that it’s worth analyzing and forecasting how various changes will change the $/ft2/day. Here are some common dynamics and how they affect the equation:
REDUCING HARVEST DURATION:
Reducing the harvest cycle length can increase revenue efficiency.
For instance, reducing the cycle from 63 to 60 days can result in a roughly 5% increase in $/ft²/day, provided there’s no adverse effect on yield or wholesale price.
If the change that speeds up the cycle also happened to decrease yield or wholesale price by more than 5%, this would be a net loss.
For this reason, I strongly favor approaches that can speed up harvest cycles along with a neutral or positive effect on quality and yield. This is one of the main outcomes that makes Phoszyme valuable in production facilities as it has been observed to slightly accelerate harvest cycles while simultaneously enhancing yield and quality.
There are some other tricks with fertilizer and crop steering targets to slightly speed up harvest cycles, but this is the most “genetically determined” parameter and thus has the least variability.
The real low hanging fruit is logistical constraints or mismanagement that result in delays between one harvest and flipping the next one.
INCREASING YIELD:
• Though outside the scope of this article, increases in yield linearly increase the revenue metric;
• all other things being equal, a 5% increase in yield (going from 80 to 84 g/ft2 average) will cause a 5% increase in $/ft2/day.
• The impact of cultivation processes and methodologies on yield is so large that it often “drowns out” variation from other sources;
• this should be the first place most facilities look for improvements.
• For a controlled-environment facility with 1000+ PFFD and running modern genetics, improvements here should be the absolute top priority if yields of trimmed flower are averaging below a minimum of 1 g/ft2/day (70 g/ft2 on a 70-day cultivar, for example).
RAISING WHOLESALE PRICE:
Optimizing wholesale price is mostly outside the scope of the article, but I do want to note the importance dynamic between wholesale price and yield.
To continue the above example, a 5% gain in wholesale price ($1500 to $1575) is functionally...
Read the full article at https://www.frontrowag.com/blogs/info/financial-kpi
