Unlock your farm’s potential: Seven habits for financial success
In today’s complex, data-intense farming operations, growers need a way to sort through all their data to make better decisions. Information is only relevant if it is used in a way that can help increase the entire farm operations’ profitability. Master the data, and you can master better operational efficiency on the farm.
Take control of your profit potential by learning how to optimize your farms potential through your financial statements. Finances can be the most challenging aspect of owning and operating a farm for any farm producer, especially a young producer. While the word “habit” often has a negative undertone, the following seven habits are keys to financial success:
avidly seek information
carefully analyze that information
partner with others
finance the right way
constantly improve in all aspects
collaborate through other human relationships
Put all that gathered information to use. Being an information junkie goes beyond following the weather and market. Successful producers are focused on new and intriguing information, including the right kind of accounting information. Most agricultural economists agree, producers need both accrual-based information and management centers, which show how costs are broken down on an enterprise basis. But it takes more than information gathering to be successful; it must also be translated into something producers can act on.
Five types of information analysis are important to financial success: trend analysis, cost analysis, DuPont analysis, shock analysis and ratio analysis. This requires having a CFO mindset. Most significant are three years of financial history compared with three years of projections. Using financial trends is increasingly important to successful farm management with the volatile agricultural environment we are a part of today.
The third habit, thinking competitively, does not mean going to the field earlier than your neighbor or selling grain for a higher price. It means how to compete strategically, learning what you’re farm operation is good at and not so good at.
Partnering with vendors and service providers and creating advisory boards can be very useful to farm managers as well. Ask consultants you have a business relationship with already or seek out retired business people to join your advisory board, this can boost management and profits significantly.
Continually push the envelope to improve everything you do in your farm management. Always come back and sharpen your tools. Take time to seek out valuable educational opportunities that keep you informed with the agricultural industry. These events should include more than your local coops appreciation meals. Find events that offer perspectives on happenings with our global agricultural market. While you embrace new ways of managing, let go of older and less useful systems.
Lastly, discover the benefit of collaborating, cultivating relationships and placing equal value on ownership, management and family. Finding a fair balance of each will help you become a better farm manager each and every day. If you are interested in finding more information on any of these habits or how you can become a better farm business manager contact your local Farm Business Management Instructor.