Opportunities for growth come from planning
It is amazing how time flies and seems to accelerate as one grows older. When looking out the windshield, the quarter-century mark is approaching quickly. It seems like only yesterday we were discussing preparation for Y2K when the clock was going to strike midnight and computer systems would shut down.
As we approach 2025, the opportunity for business and personal prosperity will not be dependent on size, type of enterprise, or the next “big thing.” Hemp, llamas, emus, and now green energy all have had the “next big thing” exposure and are sometimes oversold. Success for business and personal prosperity in the future will be about being a five percenter, or going the extra mile. When compared to their peers, these producers are just a little bit better in many areas of their business, such as production, marketing, risk management, finance, human resources, and operational efficiency, while still being effective. This must be mastered while maintaining focus on core values, goals, and vision. In summary, there are no traffic jams in the extra mile!
What do the producers who go the extra mile often do that others fail to achieve? In short, they exert extra effort by being a little bit better in many areas. The extra mile will make you a “lone wolf,” or in statistical terms, a standard deviant. In some cases, you may need to benchmark your business using key performance indicator (KPI) trends of your own business to achieve incremental success.
The “extra milers” have written goals for their business, family, and personal life. In terms of personal life, they have goals to support their physical, mental, and spiritual health. A survey of the producers at this year’s Executive Program for Agricultural Producers (TEPAP) found that only 28% had written goals. This is compared to only 4% of Americans who have written goals. Producers with written goals that are monitored generally earn more in their lifetime and have stronger mental health as a result of managing the controllable variables and managing around the uncontrollable ones.
Next on the list, the high performers take time to develop and monitor cash flow projections. Within the cash flow, they have a set of spreadsheets with tabs to test financial, production, and other key assumptions to keep the business within the financial guardrails. The elite performers realize that the cash flow is not only for the lenders, but is a valuable tool for their business’ financial success.
Fifteen minutes each day or certain periods of time annually should be devoted to planning. The “extra milers” not only plan and strategize, but they execute and monitor the results. They realize that plans are often disrupted by macro events related to geopolitics, weather, supply chain issues, and competitors. On the micro level, things happen in the business that are disruptors, and the key is not to repeat the same mistake twice and learn from your mistakes.
Producers with a high level of business management acumen know their cost of production and break-even points. They have a budget for the overall farm and for each enterprise and use this financial information to compare themselves to peers, particularly the peers in the top quartile. This is where a farm record system can be a valuable tool for peer assessment.
A trend being observed is that the “extra milers” have formal advisory teams, which may include crop and livestock consultants, lenders, and financial planners. Some producers are even reaching out to the nonfinancial public and other businesses to enrich the process. Networking and surrounding yourself with good people can energize your business strategy and personal life.
High performers realize that risk management and marketing plans are not an option, but a requirement. The magnitude of numbers due to inflation and increased interest rates requires one to conduct risk assessments that fit your operation and your management style.
The Achilles’ heel of the most successful businesses is transition management. Unfortunately, transition management is often placed on the back burner of management priorities unless a sporadic, traumatic event takes place. The high performers know that management and employee transition combined with the estate plan is often a journey that needs to have a coach or a facilitator. The time, attention, and prioritization required by everyday demands still puts transition management as a high priority business task for long-term business success.
While this list is not comprehensive, these are a few of the characteristics of successful producers that I have observed over the years interacting and engaging with the champions of the agriculture industry. Now, take a step back, pull your ownership and management team together, and assess your performance to the elements outlined.
Dr. David Kohl is an academic hall-of-famer in the College of Agriculture and Life Sciences at Virginia Tech in Blacksburg, Va. Dr. Kohl is a sought-after educator of lenders, producers and stakeholders with his keen insight into the agriculture industry gained through extensive travel, research and involvement in ag businesses. This content was provided by AgWest Farm Credit.
