Executive Farmer Network Tactics and Takeaways
Even with a poor farm economy many farms are doing more than just OK. There is a big spread between farm profitability even if on the outside they look the same. The most profitable farms are taking advantage of the current farm weakness to strengthen their farms in a couple key areas.
Agriculture in the USA and Canada has been tough for several years and it is still unclear how the current recessions from the COVID virus will play out. Let’s face it. Life and business are often unclear and sometimes a true crisis erupts, like COVID, that changes everything. At least for a time.
This Encore Insight covers what some farms are doing today to set themselves up for future success, even with a murky outlook.
Keep reading below for the most some common tactics that you can apply to your farm.
Know More than Their Bankers:
Farms that are poised for growth are not relying on their banker to tell them their financial position. These farmers intimately know their position and can explain it to their banker. Not the other way around. These farms have a solid grasp of their true financials with a focus on cash flow and ROI. Bankers may like a balance sheet but understanding the hidden expenses and where the value is added to the bottom line is more important. Acquaint yourself with the DuPont model to see if debt is helping or hurting you. In summary fully acquaint yourself with how the money flows through the business and it will put you in a better position to make your case to your banker.
Picking up the Right Employees and Cutting Poor Performers:
Though the labor market is tight, there are more employees available for hire than at any time in recent memory. Farms that already have a process in place of finding, hiring, and retaining employees have a leg up. While these farms didn’t anticipate the COVID crisis they are able to pick up employees because they already have built the human resource framework. They have spent time identifying potential prospects in the community. They have already had conservations with these prospects such as, “If you are ever thinking of doing something else someday, give me a call and we will grab a cup of coffee.” Those seeds that were planted several years ago are now bearing fruit as good employees are being furloughed. If you haven’t started looking it still isn’t too late to create a short list of prospects and start a conversation.
Cutting the Fat but Saving the Muscle:
Many farms are cutting waste in areas that are easy to purchase. What they aren’t cutting are items that are not easily bought. For example, it’s easy to cut down on parts inventory, household expenses, sell under-used equipment and delay new equipment purchases. All of these tactics lower overhead expenses. Those cut items are quickly replaced when the farm economy turns around because you can easily purchase them. What isn’t easily replaced are quality employees so many farms aren’t cutting employees, employee compensation or benefits. In summary, farms are cutting all other overhead, but they aren’t cutting employees or benefits.
Multi-Year Strategic Execution:
These farms typically spend less time than others trying to find the last possible tweak for increasing production. Instead they spend more time on crafting a solid strategic planning process along with consistent execution. These farms don’t know the future any more than anyone else, but they have a crystal-clear picture and a written plan of where they are headed in the next 3-7 years.
Not only that but they also have business processes that support them making the time to work ON their business and not only IN their business. Lack of time to focus is one theme we hear as a reason why farms are losing traction. It takes a good process of delegation, the right employees, and owner meeting structure to consistently execute on those long-term plans.
Succession planning, farm growth, and off farm business ventures all need time working ON the business. Many farms have these supporting elements in place and so are able to move faster toward their goals. Production advances are easily copied but the farms have found few of their competitors have solid strategic plans. This gives the farms a competitive local advantage over those who don’t plan.
Summary
Farms that are part of our Executive Farmer Network are using tactics that are often different from their local peers. Have they always looked at their business in a different light or did they learn this as part of peer learning? It’s probably a little of both. Good things happen when progressive farmers get together to spur each other on while swapping the best business practices. While the farmers are currently using these tactics for today’s environment, they tend to have a certain philosophy of business all the time.
These farmers realize their future success isn’t based on luck, weather or the markets. It’s about how well they run their business in times of plenty, as a business, so they are ready when tough times come. They are not afraid to challenge their own beliefs or have others challenge their thinking. They have an open mind to the business of farming and are often stronger because of it.
Do you still have questions? If you do, just drop us a line at tim.schaefer@encore-consultants.net. If you don’t want to miss an issue of Encore Insights send me an email.