This business practice reduces employee expenses and optimizes asset needs
On your operation, you must continually find the perfect balance of team members and assets. You want to be ready to seize opportunities but not stretch your finances too thin.
This concept of rightsizing the farm is a top priority at MBS Family Farms in Plainfield, Iowa.
“One of the keys as operations grow is to use the talent they have. We want to identify what our operation is good at and where we have overcapacity,” says Kyle Mehmen, a partner in the farm, which includes row crop production and a custom trucking business.
As a result, Mehmen says their farm is constantly evaluating tasks and responsibilities to outsource — everything from executive level down to administrative tasks.
OFFLOAD AND OUTPERFORM
Far from a new concept, outsourcing is simply using a non-employee to complete a task. It allows for greater focus and could offer better economics, says Peter Martin, finance and growth consultant with K·Coe Isom.
“Outsourcing, coincidentally, is one of the top ways to help your business focus on what you do best,” he says.
Not only does outsourcing align tasks with skill sets, but it also provides expense control and improved cash flow. How? Essentially you transition fixed costs to variable costs.
Common outsourcing scenarios to consider include:
- Executive-level expertise (high-level strategy)
- Highly specialized services (HR management)
- Repetitive tasks (field data crunching)
- Higher risk tasks (long haul trucking)
- Sporadic or new needs (analysis of carbon contracts)
IN-HOUSE VERSUS OUTSOURCE
At LongView Farms in Nevada, Iowa, the Henry family is undergoing a transition with the senior generation, Steve and Laurie Henry, turning over the reins to their sons, Scott and Eric. Currently Laurie serves as CFO for the operation, which includes row crops, custom feeding of cattle and contract finishing of hogs.
“As we transition, we are trying to decide if that role should be filled by a family member or if we want to outsource or cost share it,” says Scott Henry. “The daily administrative components could be done at a lower compensation level, but it would also be nice to have the person be involved in strategy discussions for our farm.”
Currently, Henry says, they use an outsourced CFO service for their feedlot. So, they are comparing the two options. While finances are at play, the Henrys are also focused on the future of their team.
“We don’t want to just focus on fixed costs versus variable costs,” Henry says. “What are we trying to manage? Are we trying to manage culture or net income?”
