We’ve all heard the stories. An unexpected divorce causes a farm operation to siphon off acres. A tragic farm accident leaves a key employee unable to resume heavy physical labor. A tornado rips through a small town leaving thousands of hogs without a roof over their heads.
Instead of getting down in the dumps over all the potential black swans that could derail your farm business, be proactive. Develop a contingency plan, which is simply a plan for the unexpected.
Reduce your risk exposure by asking some tough questions: Where are the biggest risk to your farm operation? What is your backup plan if your trucker has heart attack? What if you have a heart attack? What if your annual budget is short on income by $200,000? What if production is 20% below normal?
These questions aren’t fun to ask, but the answers are vital to your operation, says Amy Wirtz, an attorney, certified exit-planning adviser and mediator.
Start by asking key employees to identify a backup team member who could temporarily carry out their responsibilities. This can be someone already on payroll or someone from the outside who has similar skill sets. This will help you prioritize your team’s cross-training needs, Wirtz says. This will also help you decide who could fill in for you if you need to be away from the farm for an extended period.
If you think a key employee plans to retire, start the transition plan seven to 10 years ahead of time, suggests Chris Barron, director of operations and president of Carson and Barron Farms in Rowley, Iowa. That will allow you to transfer the years of knowledge that person holds.
With the current farm economy, don’t be surprised if a family member or employee decides to find a different occupation.
“It is easy to get along when corn is $7—it’s a lot harder when corn is $3,” says Barron, also a financial consultant for Ag View Solutions and Top Producer columnist.
As you have some long hours in the tractor this spring, think through your various “what if” scenarios. Consider putting together standard operating procedures (SOPs) for the key tasks around the farm. Use clear and easy-to-follow instructions and let several members of your team know where they can find these helpful documents.
“The No. 1 rule is to keep it simple,” Barron says. “As you create your first draft, involve people in the operation who are working with existing processes. At each step, ask yourself why things are being done a certain way. It might be possible to eliminate some steps.”
Have you started a contingency plan for your farm? If so, what was the hardest part? Send me a note about your experience: email@example.com