How to develop an operational budget for the dairy farm to estimate the total cost?
(a) You can use Teagasc 6-year budgeting tool to estimate inputs and outputs of cash and also profitability.
(b) Addition of Net profit and the cost of opportunity of unpaid labour or subtraction of land and debt repayments, when divided by the total capital investment, will give the return on capital.
(c) Your plan regarding target return on capital by 5 years should be greater than 10% by assuming an average milk price.
(d) After the planning of the budget is complete, the plan should be tested at a low milk price to make sure that the business is viable even in the years of low milk price particularly in the early years after conversion.