What is one-off capital?
Significant, lump-sum purchases when starting a poultry farm are common. These costs are classed as one-off capital.
In other words,
One-off = Once you’ve paid it, your farm business can run without you paying it again.
Capital = And secondly, the expense relates to your farm acquiring of an asset (something of value in your possession to use for profit).
Understanding one-off capital
One-off capital expenses are often excluded in the return on investment considerations of start-up poultry farmers.
Whilst they don’t disturb your immediate day to day gross profit position,
One-off capital expenses are real expenses that if forgotten present a false picture of success at the end of your tenure.
A business is only truly profitable if it pays you back entirely for ALL costs (upfront or continuous),
PLUS gives you excess on top.
Whilst you might say,
“I don’t care if my poultry farm doesn’t pay me back for what it cost me to buy the land, so long as it’s profitable…”
The reality is that after running your farm,
If it hasn’t recouped all costs it at best broke even or even less, it was a loss-maker.
Business is business. It ought to be assessed objectively. Without personal attachment.
Here is a list of typical one-off capital expenses of a poultry farm.
- Poultry housing
- Civil building
One-off capital expenses should always be considered in light of redemption value.
Put it this way,
To payout on a one-off capital purchase today, like land, would help you get your farm started.
The land itself once bought however is an asset.
It is something used to make a profit. Therefore it has a market value.
Land in your hand used for poultry farming is worth a certain figure.
But the same land in your neighbour’s hand tomorrow for say, haymaking, could be worth another figure.
The point being, the land has value even when you’re done using it.
So, upon your exit from poultry farming – you could consider the value gained by land sale a contribution to your overall return (ROI).