Management practices to set you apart from the competition
Throughout the year, there are times when you’re likely to be disengaged with the business side of your farm, but one expert says that’s the last thing you want to do.
As farm size increases, so does the demand for business skills, explains Danny Klinefelter, Texas A&M University and Extension ag economist. Today’s environment is characterized by an increased rate of change and a reduced window of opportunity; farmers need to be able to capitalize on opportunities.
"What separates the top 10% of managers from the top 25% is tiny," Klinefelter says. "This means we can’t have people following only the production cycle. You can’t afford to disengage from parts of the business during certain times of the year."
He offers these tips to jump ahead of the competition, but stresses the importance of prioritizing.
Coordinate Revenue. This is cost management; if you have a budget or can make a decision, do something. Make money and have an upside. The key here is knowing your costs. Try to cover all of your costs at 80% of production. It’s really hard to go broke if you never lose money. Once your costs are covered, you’ll make money and have the confidence to move when the market presents an opportunity.
Think through "What-Ifs." What could happen, and what would you do if it did? Think through the four Ds: death, divorce, disability and departure. Do you have a succession plan if one of these were to happen? What if you lost a key employee? What if you lost a major contract? Any of these could happen. Know your path forward, because these things happen quickly. Think about the different scenarios and how they might play out.
Monitor and Analyze. Look at the projected budget versus the actual, and watch the variances throughout the year. For too many farmers, this is only a beginning-of-the-year and end-of-the-year exercise. You want to correct problems and capitalize on opportunities; timing is big. Ifthere is a problem and the opportunity is there, fix it before it grows. Hindsight is 20/20. Every number in the budget ought to come from a set of assumptions. At the time you review the budget, look not just at what’s happened, but at how accurate your assumptions were. Do you need to change your plan? Your budget is only a guide; modify it.
Conduct Autopsies. Sit down and look at the results of key decisions. Which assumptions were wrong? Were there corrective actions that could have been taken? Look at the macroeconomy, not just the U.S. or your region. Identify what you learned from the situation. What are the reasons something went wrong? These sessions are also called debriefings. Look at the problem and keep a written summary of your thoughts and analysis.
Get more tips to help you jump ahead at www.TopProducer-Online.com/goodhabits
- January 2013