Challenging times can also be opportunistic times.
“We have a tendency during economic downturns to not think about the opportunities,” says Mike
Boehlje, ag economist, Purdue University.
(Download our FREE e-book "5 Profit Strategies for Young Farmers" for more great business advice and $50 off your 2017 Tomorrow's Top Producer registration.)
Smart producers will have more opportunities than they can handle during the next few years, so they should think systematically about which to pursue. Boehlje recommends you conduct a critical self-appraisal using these questions:
1. Why grow? And why not? Do you plan to reduce costs, bring in new family members or invest cash? Could this new venture spread resources too thin?
2. What are my options to grow? Should you pursue more acres or livestock enterprises? Can you capture other stages of the value chain? Would the venture allow you to diversify?
3. What strategic issues should influence my growth choices? Do you see a strong or new market potential? Does
the venture maximize your team’s competencies?
4. How should growth ventures be evaluated? What is the strategic fit? How will you measure success?
5. What skills and competencies do I need? Skills can be more limiting than capital, Boehlje says. Do you need to develop management capacity?
6. How do I finance the growth? How will this affect your equity or debt? Can you lease?
7. What business model do I use to grow? Should you weigh a merger, acquisition or franchise?
8. How will expansion impact my operation? Will it improve efficiencies and lower costs?
9. What are the start-up/scale-up challenges? Will you face construction delays? How will it affect working capital?
10. What is my sustainable growth rate? What do you expect for earnings and returns? How will it affect your debt?
To analyze farm business decisions, use Purdue’s online tool, “Farm Growth: Venture Analysis and Business Models”.
Register now to hear Mike Boehlje at the 2017 Tomorrow's Top Producer conference happening July 20-21 in Nashville.
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