The Profit Margins for 24 of the Most Common Microgreens
Written by Garrett Corwin
Introduction
If someone asked for your profit margin, what would you say? If the answer wasn’t, “Do you want to know the gross profit margin or the net profit margin?” we need to return to the basics. This blog will cover gross profit margins for various microgreen crops. We can use real numbers from my farm, Piedmont Microgreens. For a quick look at the most profitable crops, read our blog “Which Microgreens are Most Profitable?” That blog covers the basic costs to grow a tray of microgreens. However, it focuses more on other profitability factors, such as price per ounce and market demand. First, we’ll list the various costs of growing microgreens, called COGS. Next, we’ll define gross and net profit margins, then end with our profit calculations. Sound good?
If you know about COGS, gross profit margin, and net profit margin, you can skip to the Crop Analysis section.
TLDR: The average gross profit margin for your crops should be above 80% for new farms and above 85% for established farms. If you want to run profit and pricing calculations for yourself, try our Microgreen Pricing & Profit Calculator.
COGS & Margins Explained
Cost of Goods Sold (COGS) - COGS is the total cost of everything needed to grow and prepare your microgreens, like seeds, soil, and the workers who plant, harvest, and pack them. You can tell that COGS is COGS, not another type of expense, because you spend more on it as you grow more trays. If you went from growing 10 trays a week to 100 trays a week, what would you spend more on? You’d need more labor to prepare, plant, water, and harvest those trays. You need more soil, seeds, fertilizer, and packaging. You’d also spend more on electricity to run more grow lights. What are a few common items not included in COGS? Rent, software subscriptions, office supplies, utilities not linked to the growing process, insurance, certification costs, ad spend, and labor not associated with production, like bookkeeping and sales. How does that work? For example, I pay $3,500 for rent at my commercial space each month. It doesn’t matter if I’m growing 50 trays in this space or 500; the landlord still expects the same amount each month. It also doesn’t matter if I’m processing 10 invoices or 100 each week through my QuickBooks subscription. QuickBooks will still charge me $35 a month. Our annual GAP audit costs about $1,200 for the various fees. Again, it doesn’t matter if we have 30 or 300 trays in production. The audit will take about the same amount of time and the fees to the USDA are the same.
Gross Profit Margin (GPM) - GPM is the percentage of money left after paying for the things needed to grow the microgreens, like seeds and worker time, but before paying for other bills. In other words, it is the money left after paying for your COGS. You can report GPM for a specific product or the farm as a whole. Each product has a different GPM because each product has different production costs, yields, and price points. Revenue is the total money your microgreen business makes from sales. This amount is calculated before deducting any costs or expenses. You can view revenue on a per-product basis or for the farm as a whole. The revenue for a specific crop would be the selling price per ounce multiplied by the yield per tray. For example, let's say cilantro yields five ounces per tray and sells for $8.00 per ounce. Cilantro would have a revenue of $40.00. Alternatively, radish yields 12 ounces per tray and sells for $3.00 per ounce. Radish would have a revenue of $36.00. If your COGS to produce a tray of cilantro is $4.00, you would have a GPM of 90% [($40-$4/$40)*100%]. If your COGS to produce a tray of radish is $7.00, you would have a GPM of 80.5% [($36-$7/$36)*100%]. Hopefully, you can see how different crops could have different GPMs. The GPM for your farm would thus be a weighted average GPM of the crops you grow.
GPM = [(Revenue - COGS)/Revenue]*100% or GPM = (Gross Profit/Revenue)*100%
Example:
GPM = ($25.00 - $7.25)/$25.00
GPM = $17.75/$25.00
GPM = 0.71*100%
GPM = 71%
Net Profit Margin (NPM) - NPM is the percentage of money left after paying for all the farm’s costs, like rent, bills, and supplies. It's the actual profit you get to keep. You can’t calculate NPM for individual products. This is because you can’t easily divide the remaining farm expenses among each unit sold during a specific time. For example, let’s say I pay monthly rent of $3,500. Over the course of a month, my farm produces 2,000 trays of microgreens of various crop types. We could say each tray requires ($3,500/2,000) $1.75 in rent, but other NPM expenses aren’t calculated so easily. What about the toilet paper for the bathroom? There’s no direct link between toilet paper use and the number of trays grown. Nonetheless, I must account for toilet paper and many other non-production expenses somehow. All of these expenses get wrapped up in the calculation for NPM.
Example:
Farm Revenue: $100,000
COGS: $20,000
Rent: $7,500
Software & Subscriptions: $1,000
Office Supplies: $500
Misc. Costs: $1,000
Non-Production Labor: $15,000
Gross Profit = $100,000 - $20,000
Gross Profit = $80,000
Net Profit = $80,000 - ($7,500 + $1,000 + $500 + $1,000 + $15,000)
Net Profit = $80,000 - $25,000
Net Profit = $55,000
NPM = ($55,000/$100,000)*100%
NPM = 55%
COGS Calculations
Calculating COGS can be tricky because the costs will vary depending on a million factors. Where are you buying your seeds? What specific variety of mustard are you buying? Is it organic or conventional seed? Are you buying a one pound bag or a 25 pound bag? What’s your sowing density per tray? The list goes on and on. I’ll list as many highly relevant factors in the table below. I’ll make certain assumptions and generalizations to keep the analysis concise.
Assumptions:
- We’re buying one pound bags of conventional seed, except for sunflower, pea, and fava. We’ll buy 50 pound bags of pea and 25 pound bags of sunflower and fava for our calculations.
- The soil is Promix BX and it costs $54.00 per bale when bought by the pallet. A single compressed bale yields approximately 70 trays of soil. The soil cost per tray is $0.77. Plants such as cilantro, beet, chard, and nasturtium need top dressing. They require an additional half serving of soil. Their soil costs are $1.16 per tray.
- The electrical cost is $0.13/kWh. Lights are on for 16 hours per day. Two lights per shelf at 22W per light. Four trays per shelf. In other words, the electrical cost is $0.02288 multiplied by the days under lights.
- Water costs for irrigation are negligible and are not included.
- The company pays employees $17.00/hour. Based on data from my farm, it takes seven minutes to grow a tray of microgreens. The seven minutes covers several tasks - filling trays, weighing seeds, planting, watering, labeling containers, harvesting, composting, and miscellaneous handling. At a pay of $17.00/hour, the labor cost per tray is $1.95.
- The labor needed to grow a single tray is the same for all varieties. The additional waterings for longer growing crops are negligible.
- For every six extra ounces of yield per tray, we’ll add one more clamshell for packaging. We’ll use packaging from Good Start Packaging. We’ll ignore shipping costs. The cost per container is $118 for 180 containers or $0.66 per container. Professional, full-color, high-gloss labels cost $0.10 per label.
- Based on data from my farm, the disposal cost per tray is roughly $0.18.
- Pricing is what we charge per ounce to restaurant customers.
I believe I’ve addressed all the key assumptions and generalizations. Now, let’s examine the numbers. To keep the table small enough to fit into the blog, I consolidated all COGS into one column. If you want to see them broken out, you can look at the Excel table below.
Crop Analysis
| Crop | Sow Density (g) | Grow Time (Days) | Total COGS /Tray | Yield/ Tray (oz.) | Price/oz. | Revenue /Tray | Gross Profit /Tray | GPM /Tray |
|---|---|---|---|---|---|---|---|---|
| Arugula, Astro | 10 | 10 | $ 4.15 | 5 | $ 3.00 | $ 15.00 | $ 10.85 | 72% |
| Basil, Genovese | 4 | 20 | $ 4.21 | 4 | $ 8.00 | $ 32.00 | $ 27.79 | 87% |
| Beet, Detroit Dark Red | 40 | 17 | $ 5.45 | 5 | $ 8.00 | $ 40.00 | $ 34.55 | 86% |
| Broccoli, Waltham 29 | 20 | 10 | $ 5.20 | 8 | $ 3.00 | $ 24.00 | $ 18.80 | 78% |
| Cabbage, Red Acre | 18 | 10 | $ 5.37 | 8 | $ 3.00 | $ 24.00 | $ 18.63 | 78% |
| Celery, Unspecified | 4 | 20 | $ 4.06 | 3.5 | $ 8.00 | $ 28.00 | $ 23.94 | 85% |
| Chard, Yellow | 35 | 17 | $ 6.05 | 5 | $ 8.00 | $ 40.00 | $ 33.95 | 85% |
| Chervil, Curled | 20 | 17 | $ 4.80 | 5 | $ 8.00 | $ 40.00 | $ 35.20 | 88% |
| Cilantro, Leisure Split | 40 | 17 | $ 5.27 | 5 | $ 8.00 | $ 40.00 | $ 34.73 | 87% |
| Dill, Bouquet | 20 | 17 | $ 4.51 | 6 | $ 8.00 | $ 48.00 | $ 43.49 | 91% |
| Fava, Unspecified (Organic) | 300 | 11 | $ 7.62 | 14 | $ 2.50 | $ 35.00 | $ 27.38 | 78% |
| Fennel, Sweet | 20 | 17 | $ 5.89 | 7 | $ 8.00 | $ 56.00 | $ 50.11 | 89% |
| Kale, Red Russian | 18 | 10 | $ 5.16 | 8 | $ 3.00 | $ 24.00 | $ 18.84 | 79% |
| Kohlrabi, Purple | 16 | 10 | $ 5.48 | 8 | $ 3.00 | $ 24.00 | $ 18.52 | 77% |
| Lettuce, Romaine | 10 | 10 | $ 4.25 | 5 | $ 8.00 | $ 40.00 | $ 35.75 | 89% |
| Mustard, Scarlet Frills | 8 | 17 | $ 5.76 | 5 | $ 8.00 | $ 40.00 | $ 34.24 | 86% |
| Nasturtium, Empress of India | 80 | 13 | $ 9.15 | 7 | $ 8.00 | $ 56.00 | $ 46.85 | 84% |
| Onion, Tokyo Long | 30 | 17 | $ 6.99 | 6 | $ 8.00 | $ 48.00 | $ 41.01 | 85% |
| Parsley, Italian | 12 | 24 | $ 4.33 | 3.5 | $ 8.00 | $ 28.00 | $ 23.67 | 85% |
| Pea, Field | 300 | 9 | $ 6.71 | 16 | $ 1.75 | $ 28.00 | $ 21.29 | 76% |
| Pea, Tendril | 300 | 11 | $ 6.84 | 14 | $ 2.50 | $ 35.00 | $ 28.16 | 80% |
| Radish, Triton | 40 | 9 | $ 5.65 | 12 | $ 3.00 | $ 36.00 | $ 30.35 | 84% |
| Shiso, Green | 10 | 17 | $ 6.16 | 6 | $ 8.00 | $ 48.00 | $ 41.84 | 87% |
| Sunflower, Black Oil | 120 | 9 | $ 6.13 | 14 | $ 1.75 | $ 24.50 | $ 18.37 | 75% |
Conclusion
It’s reasonable to expect your average gross profit margin (GPM) to be above 80%. If you’re an established farm, your average GPMs could exceed 85% or even 90%. A larger farm lets you save money. You can buy supplies in bulk and use automation, which helps cut down on labor costs. As you can see, certain crops have a significantly higher GPM than others. Arugula is notably low because it’s low-yielding and you can’t charge that much. Dill is notably high because it has a modest yield and you can charge a premium. However, you must remember that GPM is only part of the story. Market demand is a critical consideration when evaluating the economics of a crop. As I discuss in my other blog, Which Microgreens are Most Profitable?, market demand is an important lever in determining what crops to grow. It doesn’t matter that dill has a high GPM if you’re only growing one tray per week. Finally, GPM only covers the top half of your income statement. Your net profit margin (NPM) is the number that matters most at the end of the day. How much money are you left with after all expenses? If you want to run profit and pricing calculations for yourself, try our Microgreen Pricing & Profit Calculator.
Related Articles
Which Microgreens are Most Profitable?
What to Charge Different Types of Microgreen Customers
How to Fertilize Your Microgreens for Bigger Yields & More Revenue!
Share this post: