Seven financial habits are keys to success for young producers. These farmers:
- avidly seek information;
- carefully analyze that information;
- think competitively;
- partner with others;
- finance the right way;
- constantly improve in all aspects; and
- collaborate through human relationships.
"Being an information junkie goes beyond weather and markets," says Greg Wolf of Kennedy & Co., LLC, an accounting and consulting firm. Wolf spoke at Tomorrow’s Top Producer Seminar in Chicago. Successful young producers are focused on new and intriguing information, including the right kind of accounting information, he says. In his view, producers need both accrual-based information and management centers, which show how costs are broken down on a sector basis.
But it takes more than information to be successful; it must also be translated into something producers can take action on, Wolf says. Five types of analysis are important to be successful with information—trend analysis, cost analysis, Dupont analysis, shock and ratio analysis. "This requires having a CFO mindset," Wolf states. Most significant, he says, are three years of financial history compared to three years of projections.
Wolf’s third financial habit, thinking competitively, does not mean getting into the field earlier than your neighbor or selling grain for a higher price. Rather, it means "how to compete strategically, learning what we’re good at and not so good," he says. Doing so requires thinking like a CEO, Wolf explains, "cultivating comparative advantages."
For example, he had a farm client who grew wheat, milo and cattle. One of this client's advantages, though, was in management as well as the gift of creating equipment for specific needs. By thinking strategically, the farmer shifted to irrigation and discovered new profit centers with a higher return—watermelon, potatoes, collard greens and spinach.
Partnering with vendors, service providers, and even creating advisory boards can be very useful financially, Wolf says. One farm brought in a retired CEO of a medium-sized implement business to sit on the farm's advisory board, and boosted management in a phenomenal way. "It’s definitely had an impact on their bottom line," he notes. In another case, a farm partnered with a new lender that allowed it to consolidate debt.
It's also important to continually push the envelope to improve in everything you do. "Always come back and sharpen the saw," Wolf says. While it is important to embrace new and better ways of managing, it’s equally important to let go of older and less useful systems, what he calls "creative destruction." The result is a system that becomes more profitable, Wolf adds.
Lastly, Wolf stressed the concept of collaborating, cultivating human relationships, placing equal value, for instance on ownership, management and family.
See all of the news, photos, videos and more from the 2012 Tomorrow’s Top Producer event in Chicago, Ill.