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Business Matters: The Power of Collaboration

February 29, 2012
By: Chris Barron, Top Producer Columnist

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The well-known adage "two heads are better than one" bolsters the value of collaboration. Large companies often collaborate in specific areas to improve the overall quality and value of their products. The resulting economic efficiencies can lead to business consolidations, further improving profit opportunities for both companies. For example, even though Steve Jobs (Apple) and Bill Gates (Microsoft) were competitors, they worked together on various fronts, yielding large financial gains with mutual benefits.

As technology plows into agriculture at breakneck speed, there will be significant challenges and opportunities ahead. Who will you collaborate with?

Opportunities. One compelling fact about farmers is that the average age is pushing 60. The transitional changes during the next 10 years, coupled with any economic challenges, have the potential to be massive. Many senior producers have yet to determine a successor; some have no family members interested in returning to the farm. Conversely, there are young farmers looking to get their foot in the door or expand their operation. This dynamic presents a unique opportunity for young and old alike to collaborate.

Why? Improving one’s quality of life is a significant motivator in collaboration efforts. In particular, most senior producers place a high value on time, and they want to enjoy life more as their career begins to wind down. Younger producers also value time with their family and children. Creating a better work–life balance can translate into higher levels of productivity on the farm.

Researchers define quality of life as: "Contentment with everyday life; the degree of enjoyment and satisfaction experienced in everyday life." You might also consider money as a component of quality of life; however, in my experience with collaborations, those who collaborate for the sole purpose of monetary gain are destined to fail.

Economic Benefits. Bottom-line economic improvements can be huge with the proper structure and design of a collaboration effort. We each have our own niche or competency. The key is to align ourselves with others who complement our strong points and fill our gaps or bottlenecks. Placing more emphasis on what you’re good at and allowing your partners to do the things they’re good at can produce immediate results. For example, you might do a poor job of marketing grain, while your potential partner might be very effective. You might be a good mechanic, while your potential partner has always taken his equipment to the dealership for repairs.

Another consideration is that when two or three producers join forces, they can be overloaded with equipment. This presents a win-win opportunity for consolidating and updating an equipment fleet that fits everyone involved.

Additionally, there might be some in your alliance who would prefer to have more capital available for operating or other expenditures. This allows for a specialization structure where one party owns the equipment and another party invests capital in other areas, such as grain storage or land.

There are also obvious tax advantages for the senior members to transition their equipment value over a period of time. This gives the younger producer access to higher-quality equipment at a lower financial risk while at the same time improving net worth.

Managing your farm operation will continue to increase in complexity in the years ahead—and viewing other farmers strictly as competition could lead you to leave potential benefits on the table. Growing your farm business is not always about doing more. It’s really about alwa­­­ys doing better!

Learn about the Top Producer Executive Network.


Chris Barron is director of operations and president of Carson and Barron Farms Inc. in Rowley, Iowa. He is also a farm business consultant and the author of the AgWeb.com blog "Ask a Margins Expert." To submit questions and comments, e-mail Chris at cbarron@cb-farms.com.

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FEATURED IN: Top Producer - March 2012

 
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