Posts

Shaking Hands

Let’s Make a Deal

/0 Comments/in , , /by

Here is an incredible opportunity for you!

You can invest in a business that has grown its assets by 100% over the last 6 years. It has doubled its production and its staff compliment in that same time-frame. Revenues have increased by over 130% since 2005.

Interested?
No…why not? The description is accurate of many farms, maybe even one you know.

We’ve purposefully made no mention of liabilities or retained earnings, nary a word on profitability or cash flow. Sadly, it is because ignoring those is typical when expansion is allowed to be the critical success factor.

Investing in a business that has inconsistent profitability and little (if any) controls over cash flow is beyond risky. Is it any wonder that industry lenders demand detailed and accurate information before investing in your business?

To Plan for Prosperity

Do up a Debt to Net Worth calculation. If your figure is 1 to 1, that means your creditors have equal ownership as you in your business. If your Debt to Net Worth is greater than 1 to 1, your creditors have more skin in your game than you do.

If you wouldn’t invest in a business that cannot prove reliable profitability and consistent cash flow, why would anyone else?

 

MISmanagement

Operational MISmanagement

/0 Comments/in , , , /by

I recently had an experience on my least favorite Canadian airline which was so bizarre that laughter was all I could do in the moment.

The original plan was as follows:

  • 5:50pm Chicago to Toronto;
  • 2.5 hour layover at Pearson, relax, eat, maybe get some work done;
  • 10:55pm Toronto to Regina.

While waiting to board the 5:50pm flight, watching time tick on and on, and even though our plane was at the gate and empty, there was still no one boarding the aircraft at 5:50pm. Yet, the information screen at the gate insisted that our flight was “on time.”  I snapped this picture and tweeted it.Operational MISmanagement

At 5:55pm, an announcement was made: due to runway construction at Toronto airport, our departure from Chicago was being delayed until 9pm. We were instructed to go relax, find something to eat, and come back to the same gate at 8pm. (If you’re keeping track, that is a three hour delay which would have us landing in Toronto at 11pm…5 minutes after my flight home was to leave Toronto for Regina. Clearly, I’m not going to make my connection.)

After to speaking face to face with an airline “customer service agent” (you can infer that the quotes are meant to imply sarcasm) I was informed that there were no other flights on other airlines that might get me to Toronto to make my connection. When asked who would be picking up the cost of my hotel room in Toronto since it was clear my connection would be missed, the response was “We (the airline) don’t do that. But I can give you a food voucher for here (Chicago O’Hare), just be back by 8pm to board this flight.” He hands me a $15 voucher, which was about enough to buy a bottle of water and a piece of gum in O’Hare…

As I begin to circle around to find somewhere to eat, I find myself walking right past my gate, and see a line of people boarding the plane!! The information screen at the gate now says the flight will leave at 6:50pm (If you’re keeping track that is 1hr delayed from the original schedule, but a full 2hrs ahead of what was we were told 15 min earlier.) So I board the plane.

Despite the posted 6:50pm departure time, an announcement from the flight deck is made at 7:15pm: “We’re just waiting on a few passengers and then we’ll push back from the gate. Due to runway construction at Toronto Pearson, we will be unable to reach our gate in Toronto upon arrival. So we’re going to push back and sit on the tarmac in Chicago for 1 hour; we can sit on the tarmac here or in Toronto, it really doesn’t matter. So you know, it’ll be about 1hr from push back to liftoff.” I still can’t understand why we needed to board just to sit in the aircraft when we could have remained in the terminal and actually had something to eat…

Finally we have inched our way to the runway. Wheels up at 8:10pm. One hour flight to Toronto, plus the time change, and we touch down at 10:10pm. Because it’s Toronto, there is 15 minutes of taxiing; we’re at the gate at 10:25. I have 30min to clear customs, clear security, and make my connection home. Now if only the 22 rows in front of me on the flight had been courteous enough to let those of us with a connection off the plane first… To their credit, the airline did request that other passengers without a connection remain seated. No one complied.

long lineMy legs still ache from being at a dead run, with luggage and wearing a suit coat, for what seemed like a mile despite likely only being half that. My Nexus card allowed me to bypass the 308 people in line at customs (I was at a dead run, no I didn’t stop to count them) and thankfully at 11pm, there was no line at security. I am grateful to my fellow passenger coming from Chicago, just as late as I, trying to catch his connection to Montreal. He new where to go to get to our concourse (his departure gate was 2 down from mine.) I would have been lost had I not been following him.

They closed the doors to the jet bridge as I ran up to my departure gate. Through gasped breath, I explained in 2 sentences why I was late (regretfully, I may have used a few expletives.) The gate agent was without a doubt the best person I’d been in contact with from this airline on this day. She let me through, I boarded, and got home as planned.

 

To Plan for Prosperity

Operational MISmanagement costs airlines millions of dollars and immeasurable goodwill. Just have a look at United Airlines’ woes over time… Here are my questions relative to my experience described above:

  1. Runway construction at Pearson did not start unannounced on that day. The airline would have known about it for a long time. Why would we only be notified AT the time of original departure (5:50pm)?
  2. How can a 3 hour delay turn into a 1 hour delay in 15 minutes?
  3. Why rush to board only to sit on the tarmac for an hour before liftoff?
  4. People actually missed that flight, and in my mind it was because the airline told them to come back to board at 8pm but was now leaving the gate by 7:20pm. Part of the delay pushing back from the gate was because their luggage was being removed from the plane. I can’t even formulate a question for this, it is so asinine!!
  5. I was likely to miss my connection due to no fault of mine, yet the airline wouldn’t offer to pay for my hotel. How much do they value their passengers?

M-I-S is capitalized because if refers to your Management Information System. Your Management Information Systems, whether you’ve formally addressed them or not, are put to the test as you approach spring seeding. Tracking inventories (seed, fertilizer, fuel, parts, etc.), people (who is operating what & where), and cash (keeping vendors paid, moving grain as required) are all part of your M.I.S. Lose control of one piece of your M.I.S. and see how things are affected.
What are the impacts of seeding too soon, seeding too late, missing a pesticide application window, running out of fuel, or running out of capital…?

You have a system to get your crop seeded, to get it harvested, to manage all aspects of your business in between. It keeps your business running without a glitch, or in the case of a hiccup it provides adjustments to get back on track.

If Air Canada has any sort of “system,” it’s not working. I’m not sure how they stay in business. They could benefit from a good business advisor…

farmfutures farm survival

Derived from Farm Futures “Survival Plan”

/0 Comments/in , , , , /by

This opinion piece was published on farmfutures.com on April 3, 2017. Titled What’s Your Farm’s Survival Plan, the author, Mike Wilson, describes how farm income in the US Mid-west is falling and thus challenging working capital to remain at adequate levels. As you have read here, and on my Twitter feed (if you follow me) is how borrowing  is becoming more difficult for US Mid-west farmers. I’ve posed the question several times is “Who thinks this can’t happen here” (in western Canada?)

Wilson lays out five practices that farmers can use to improve their chances of keeping a good relationship with their lender. Before discounting the suggestion by saying, “Yeah, well it’s different in Canada,” give it a read and appropriate consideration. Unless, or course, you believe it can’t happen here…

Snip Farm Futures Farm Survival The graphic is a screen capture of an excerpt of the article from the Farm Futures website. The text has been copied below, with my comments following each one:

What do lenders think when you walk through the door? If you do these five things, financing shouldn’t be much of an issue:

  1. Lenders will work with farmers who can communicate and execute a plan, whether it’s for marketing, cash flow, or both.
    *KG: we’ve discussed here many times over the years how important it is to communicate with your lenders who typically don’t like surprises. And while we’ve been preaching for years the value of planning, there is a key word in the statement above that, if ignored, makes planning the useless task so many farmers feel it is: execute.

2. Understand breakeven analysis and keep family living expenses low. Look for that extra dime in your marketing plan. Watch for opportunities to keep yields above average. A lot of that is just paying attention to details.
*KG: break-even analysis is one part of it. Utilizing Unit Cost of Production (UnitCOP) is critical not only to your break even analysis, but also your marketing strategy. It provides a built in sensitivity analysis to both prices and yields. It will clarify the importance of “that extra dime” in your marketing plan. It provides a level of detail that most farms still don’t employ in decision making…

3. Lenders need to know how you will pay them back. You can walk into their office, tell them about the 50 acres that just came up for sale next to your farm and expect to be approved — but that’s not how it works. They need to see that you’ve done your homework. They need to see your accurate balance sheet, income statement, accrual income adjustments, and other key financials. They need to see the numbers before they can pull the trigger.
*KG: Bankers make informed decisions; “they need to see the numbers before they can pull the trigger.” If the numbers are absent, it’s a hard stop. If the numbers are questionable, meaning that the credibility of the figures come into question, it’ll also be a hard stop. Several years ago, I witnessed a would-be borrowing get slammed by several quality bankers because the borrower provided sloppy info that was unverifiable. Lenders won’t make a decision to proceed without quality information; neither should you.

4. Be conservative with your money. “This will be a learning experience,” says Dan Gieseke, Missouri Farm Service Agency farm loan chief. “Many have not been through a tough time. They need to be conservative now, so they can be ready to take advantage of opportunities when they come along.”
*KG: The best time to be conservative with your money was 5 years ago. The next best time is right now. My old pal Moe Russell says, “If you are greedy in the good times, you’ll be on your knees in the bad times.” While shiny paint often feels better than a big bank balance, it is that bank balance (the life-blood of your business: working capital) that will not just help you survive the bad times, it will propel you through them; it’ll maybe even help you thrive during those bad times when your competitors are on their knees…

5. Use records to do analyses. “My fear is that farmers don’t use them,” says Purdue economist Freddie Barnard. “In the ’80s, we got beat up. But the tools to do the analyses then were not out there. There are tools now. Just use them, and try to make informed decisions.”
*KG: there are so many tools available, so much information available, that I would have a hard time arguing against someone who is admitting that “it’s overwhelming.” It is. While I would empathize, I wouldn’t accept that as an excuse. There are many qualified people in this industry who are ready, willing, and able to help you sort through the overwhelm, and establish a strategy to develop and implement a process to get you to a working level of comfort with data management, analysis, and decision making.

To Plan for Prosperity

“Do what you do best, and get help for the rest” is a cornerstone of my advisory work. If none of the five points above strike a chord with you because you don’t know how to do them, or don’t like doing what they suggest, then take a moment to ask yourself if the five points above are actually important to you.
If they are, but you’re not sure where to start, then start by picking up the phone and calling someone for help.
If they’re not, then good luck to you. You’re going to need it.

Your business, your family, and your legacy are too important to be left to chance.

Who is your customer

Who’s Your Customer?

/0 Comments/in , , , /by

Twitter was (are you ready for this) “all atwitter” recently over the forcible removal of a passenger from an overbooked United Airlines flight.
I recently picked up on a Twitter conversation where a farmer was railing on “family farms” that are bigger than the family can operate (his logic was around size & scale of a farm that needs hired help is no longer a “family farm.”) His argument focused on how consumers hear “family farm” yet see large businesses that are worth millions, and how that could affect credibility.
I spent this past weekend in Las Vegas; my first time. It was easy to spot variations in customer service that range from excellent to hardly adequate. (FYI: I specifically chose to not use the term “barely” adequate because in Vegas, that has no many other meanings…)

One might think I spend too much time on Twitter. Actually, I find myself spending less and less; I am not an ideal social media marketer.

Regarding United, they made the decision to overbook this flight (and probably hundreds of others in any given week.) They knew it would inconvenience their customers and might even lead to a firestorm on social media (which it did.) By these actions, United has done a poor job of understanding its customers.

The farmer twitter bit about how consumers might perceive the message of “family farms” has some merit. We’ve learned that consumer perception need not be confused with facts (this is known as the post-truth phenomenon) and no matter the message, truthful or otherwise, belief rules all. Notwithstanding all that, the agriculture industry has done a poor job of connecting with consumers to create sufficient trust to ward off this post-truth B.S. we’re now swilling in…

Service in Las Vegas, a city built on tourism, is varied. Cocktail servers in most casinos were terribly uninterested and submissive, while dealers were all pleasant and engaged. The hotel housekeeping staff always offered a smile and “Good Morning!” to everyone that passed by. Servers in restaurants were generally outstanding.

Recognizing who your customer is and how to connect with them stems from culture. Culture is driven by the organization’s leadership, and is reflected in the environment it creates for employees to interact with customers.

To Plan for Prosperity

It matters not if you are United Airlines, a farm, or a Las Vegas hotel & casino, your customer are not your shareholders, your employees, or your suppliers. Your customers are those who purchase or consume your product or service. Your customers are how you monetize the work you do. How are you making it easier for your customers to want to do business with you?

 

CYFF

CYFF (Canadian Young Farmers’ Forum)

/0 Comments/in , , , , , , /by

Greetings from CYFF

The Canadian Young Farmers’ Forum brings together farmers from across Canada. This past weekend in Ottawa, they held their annual convention and invited me to speak as part of their agenda.

There were many takeaways from the event; here are a just a few, with my perspective following in brackets.

  1. Agriculture is incredibly diverse right here in Canada. (We shouldn’t just stay in our little echo chamber with others who produce the same as what we do.)
  2. Even with such diversity, young farmers face similar challenges across all sectors and across all provinces & regions:
    1. Building and protecting adequate working capital is difficult (I’ll keep preaching the importance of this;)
    2. Profitability is cyclical (we may have heard this before;)
    3. Competition is increasing for land, labor, etc (and they’re stressed out trying to figure out how to handle it;)
    4. Small farms struggle to compete with large scale & well capitalized operations (yes, there are large potato, berry, vegetable, dairy, poultry, & egg farms like there are large grain and cattle farms, and competing with them for land and labor is just as tough;)
    5. Young farmers feel lost when trying to determine if/how their parents ever plan to slow down/retire (this also applies to every other family business, not just farms.)
  3. The desire to learn more and be better is strong (learn, unlearn, relearn.)
  4. The desire to take part in something bigger, such as industry groups with lobby or policy influence, is significant.

CYFF is for farmers under 40. Based on the passion of these young farmers, and their desire to learn & be better at everything they do, I think the future of agriculture in Canada is in good hands.

To Plan for Prosperity

The issues you face, the challenges you struggle with on your farm are the same as almost countless other farms. The relief and comfort seen on the faces of these young farmers when that became evident was obvious. They felt less stressed and less alone when they realized that they are not the only ones feeling the angst, the despair, or the helplessness that dogs their personal situation at home.
Don’t sit alone and wallow in your own anguish over what challenges you in your business. Sharing your trials and tribulations will not only help mentor the passionate successors to our industry, it may help you find comfort in knowing “you’re not alone.” It might even turn up a solution.

tepap-logo

Greetings from TEPAP

/0 Comments/in , , /by

The Executive Program for Agricultural Producers has been described as “a farmer MBA.” Born over 20 years ago at Texas A&M University and the brain child of Danny Klinefelter, TEPAP has helped numerous farm managers and operators improve their businesses in ways they never considered before.

In Session 1, there is Canadian representation from New Brunswick to BC, with the heaviest concentration from the prairies. The US is widely represented from all 4 corners (Washington, California, Florida, and Vermont.) There are 2 participants from Australia.

Everyone has a unique reason to want to better themselves and their business, yet the theme around the room during introductions was similar. Even the Aussies remarked at how the only difference in what they are hearing this week compared to back home is the accent.

Prosperity is at the root of everyone’s reason for seeking improvement. Consider these 3 facets of your life and business when determining where and how you want to be better.

Communication in Business (or with Family)

As Elaine Froese likes to say, “It’s never a problem until it’s a problem.” Why not sit down with business partners, family members, etc, to clarify the issue, and set a path for resolution? We know that the answer is “because it isn’t that easy.” But just because it isn’t easy is not permission to avoid the situation. Consider this: if expectations aren’t being met, and no one is talking about it, you’re setting up for a train wreck! I captured a quote from Dick Wittman this week: “The biggest mistake we make in family negotiation is assuming what’s going on in everyone else’s head.”

Are you ready to seek out the resources you need to help you have the talk?

Financial Knowledge and Management

Every day, I learn more about improved methods to gather, analyze, and manage information, all so that better decisions can be made at the farm. The resources available to farmers today are greater in number and scope than ever before. I have gleaned new process to help determine the age old questions of “rent versus buy farmland,” and “what is the actual ROI on that piece of equipment?” I am eager to use these new tools with clients as soon as possible.

What gaps do you have in your current financial knowledge and management that need to be addressed?

Life Balance

No longer are we calling it “work-life balance” because you don’t have two lives, you have one…and it needs balance. If you are out of balance, have you considered why? The TEPAP faculty recognizes that the participants in the room are overachievers, who, statistically, find it easier to work than to play. This is a challenge for anyone who has the level of passion for their business and industry that most farmers do. What we must acknowledge is that this can often be a challenge for the families of said passionate farmers too.

How have your priorities changed over the last 3 years? Are you adjusting with the changes life brings, or staunchly entrenched in old habits?

To Plan for Prosperity

It’s been said that lifelong learning is one of the key tenets to achieving the life we want to live. And our businesses must keep growing to sustain themselves. It need not be learned, achieved, or practiced all at once. Improvement is a process. You can’t eat a whale with one bite, so start small with some important goals, and then do the hardest part: take the first step.

3-circle

3 Circle Model in Transition (Succession) Planning

/0 Comments/in , /by

Twice in the course of a week, I was able to partake in a Canadian Association of Farm Advisors (CAFA) Succession Update following the 3 Circle Model http://johndavis.com/three-circle-model-of-the-family-business-system/
The three circles represent each of Ownership, Business, and Family: the critical components that hinder any business transition process. I was speaking in the business circle.

Working with family can be as incredibly rewarding as it can be incredibly challenging. The nature of living with those you work with, grew up with, and hang out with, leads itself to challenges just from being in such close continual contact. Throw in the communication challenges that every family must deal with, and it is truly amazing more family businesses don’t fail.

The illustration of the 3 Circle Model is a simple yet accurate depiction of why there can be challenges in family businesses. The root of the challenge, when tapping into the experience of experts who consult family businesses, is the relative inability of family members to separate the three circles. Issues that belong in the “business” circle often end up in the “family” circle; issues in the “ownership” circle often have heavy effects on the “business” circle; issues in the “family” circle usually ripple outward to affect both the “ownership” and “business” circles.

Success in separating the circles can only be had if all family members are conscious and intentional in their effort to recognize the tendency to let issues bleed from one circle to another and proactively manage their behavior to not let it happen. This is easier said than done.

3-circle-with-a-twistI especially like this graphic that Jim Snyder, National Director, Agricultural Practice Development with BDO, used in his opening presentation to describe the 3 Circle Model. When you think about torque, a planetary is a tremendous bit of engineering (a nice plug for all you gearheads.) Separating the three circles in the model creates a strong business and stronger family. A family affected by the crossover of issues between the circles will be in a constant state of damage control.

Direct Questions

How do you separate the issues you deal with in your family business between three distinct circles: family, business, and ownership?

When you become aware of family issues affecting business, or ownership issues affecting family, etc, how do you stop, reset, and refocus to deal with the issue and not let it “creep?”

Family business is the backbone of our nation’s economy. Are you a “family business” or a “business family?”

From the Home Quarter

There is a distinction between a family business and a business family (please contact me to discuss further.) Neither is bad, but there is a difference in mindset and approach to family, business, and ownership. Knowing which type you fall into will help you understand the challenges to be managed as you eventually navigate through the 3 Circle Model of your future business transition. Because, whether you acknowledge it or not, one day your business will need to transition. You might as well be ready for it…

Reinvent yourself _whats next

Reinventing

/0 Comments/in , , /by

The Olympics have now come and gone. The excitement and the drama, the anxiety and the relief, have all subsided. Real life makes its triumphant return.

Imagine for a moment what “real life” will now be like for young Penny Oleksiak. At the tender age of 16, she earned a spot on Canada’s Olympic team. In her first Olympics (please note that…her FIRST Olympics) not only did she perform well, she medalled. Not only did she medal, she won 4 medals: 1 gold, 1 silver, and 2 bronze. Now unofficially dubbed as Canada’s “Best-Ever Summer Olympian,” where does she go from here?

The pressure to be better 4 years from now at the next Olympics will no doubt be tremendous. Will she be expected to win 6 medals? All golds? What?

Imagine for a moment what “real life” is like for a phenom like Connor McDavid. At 19, he’s entering his sophomore season and is no longer a rookie pro-hockey player. According to a Google search, he’ll earn $832,500 US this upcoming season (approximately $1,071,000 Cdn at current exchange rates.) He lives life under a microscope, in the spotlight, and by being a part of the Edmonton Oilers, he is certainly a big fish in a small pond. (Enough metaphors for you?)

The pressure to be better this season, and each season going forward will no doubt be tremendous. Will he be expected to score 30 goals? 40 goals? Eclipse Gretzky’s records? What?

These are examples of two exemplary young Canadians who have worked harder, and overcome more challenges, than almost everyone in order to achieve what they have.
What happens if they can’t follow up to their early success? What if the pressure gets to them? What if they fail to meet expectations? Fear is an incredible demotivator…

Neither of these 2 young athletes will disappoint. Even if their future success is pale in comparison to what they have already achieved to date, no one can take away what they have accomplished before 20 years of age. So what if they have long and successful careers? No matter how you slice it, they will be ready to retire in the next 15-20 years…old hags in their mid-30’s.

While it is easy for us as “regular people” to glorify the thought of retiring from a professional sports career before age 40, living the good life for the rest of our days, it’s just not that easy, nor is it real. While physically my prime is behind me, now in my 40’s I have more to offer, more to contribute, and can make bigger and better change in the world than I could have as a 20-something.  Mine has been an evolution. But for young athletes, it’s a reinvention.

What does someone who was at the peak of their career, and earning power, in their 20’s do once they’ve retired in the 30’s or 40’s? How does one reinvent oneself when one was once at the top of the world? It’s got to be awfully bloody difficult to overcome the mental and emotional hurdles that threaten the efforts of these people to reinvent themselves, to find new purpose, to contribute, to make a difference…

I certainly do not envy them…

You, as a business owner, will hopefully have the opportunity to reinvent yourself. That is to mean that you’ve lived long enough to be able to enjoy retirement! It is not something to fear and loathe, it is something to celebrate and enjoy! Do not bemoan living long; it beats the alternative.

Direct Questions

Life will change, and your ability to adapt is your key to success. How are you planning to reinvent yourself for when the time comes? Who are you looking to for help?

From the Home Quarter

If you’re a farmer getting on in years, and if farming is all you’ve done, then you are likely facing a reinvention in the future. But as a farmer with decades of tenure, at least you are not reinventing yourself during a possible mid-life crisis, like a young athlete who was once on top of the world…

 

canola field

Critical State – Debts Get Called

/0 Comments/in , , , /by

Imagine, if you will, that it is a nice harvest day in late August. The combines are serviced and running, warming up to head to the field. You’re in the house grabbing a quick bite and filling your water jug before embarking on what looks like a long afternoon of harvesting. The phone rings, it’s the bank. They tell you they’ve made the decision to reduce their market exposure in ag lending in your area, and that you’ve got 30 days to “find a new lender.”

While I hope this is an imaginary situation for most of you, it is a true story for a client of mine from my banking days. It wasn’t my bank that “de-marketed” them; that happened years earlier, but it left a sour taste in their mouth. They had cash flow challenges like almost all grain farms did coming out of the 90’s, but their file was not at risk of going south. There was no indication in the previous weeks or months that their loans may get called, so you could only imagine the shock, the disappointment, and the anger at getting that type of phone call at the beginning of harvest. How could they find the time to seek a new lender when the combines had to roll?

Here are some terms that borrowers need to understand:

  1. Demand Loan: this is a loan that provides the lender with the right and opportunity to demand full repayment of the loan at anytime. While there still may be time remaining on the loan term, notice of demand to repay the full balance is an option the lender can exercise.
    Structuring your borrowing to include no demand loans does not guarantee that you wouldn’t face a situation as described above. Demand loans are typically listed as a current liability in your financial statements which makes your working capital look offside.
  2. Effective Annual Interest Rate: interest payment terms, specifically interest compounding periods, affect the actual dollar amount of interest you pay on a loan. Interest that is compounded more frequently will cost more than less frequently (this also applies to your interest bearing investments: more frequent compounding pays you more interest and vice versa.) Lenders are required to calculate and disclose the annual effective rate so that borrowers can have a standardized figure to compare.
    Consider 5% interest compounded semi-annually; the effective annual rate is 5.0625%. Consider 5% compounded quarterly, and the annual effective rate becomes 5.09453%. The difference between the posted 5% and the annual effective rate in these two examples is the compounding interest.
  3. Covenants: as the term implies, covenants form part of the binding agreement between you and your lender. Breaching a covenant could put your total borrowing at risk of being demanded by your lender. Covenants can be for anything from minimal financial metrics to submitting financial reporting. Sluffing these off will hurt your lending relationship.

Direct Questions

What information do you require from your lender to give you more knowledge and comfort?

How are you being proactive in managing your relationships with your lenders?

From the Home Quarter

Receiving notice that your debts have been called instantly puts your business at critical state. While having an excellent relationship with your lender does not guarantee that you won’t be the victim of a corporate de-marketing decision (like my former clients above,) it will put you at the top of the list of clients to keep if there is ever a culling program initiated by bank HQ.

failure to communicate

Critical State – Inability to Communicate

/1 Comment/in , , , , /by

A few weeks ago, we opened a dialogue on Critical State which is defined as “the point at which something triggers a change in the basic nature or character of the object or group,” or to paraphrase: something can be referred to as being in a critical state when at the point of significant change.

Inability to communicate is, in my opinion, the greatest single cause of breakdown in relationships of all types and sorts. While many other factors come into play, and often bear most of the blame, the primary cause is communication and its lack thereof.

There are virtually countless books, courses, and resources dedicated to improving communication in almost any circumstance: marriage, parenthood, employee, co-worker, sibling, etc. etc. I have only read a minute fraction of what is available on this topic, so I cannot offer insight as to which are most beneficial. But, like you, I have a lifetime of experience in communicating with others. It is fair to say that all of my communication experiences could use improvement, because to say otherwise would indicate that there was, at times, perfection in my communication interactions. Let’s be honest, there is always room for improvement.

Here are some of the most important relationships in your business that need solid communication:

Bankers/Lawyers/Accountants

Often times, when hearing banker-ese or legalese, we tend to not ask that which we do not know or understand for fear of appearing, well let’s say it, stupid. Many people have signed onto something that they did not want, nor did not understand because they were unable to communicate their questions, their fears, or their outright disagreement. The future ramifications of a lack of clarity in matters of borrowing or of law can be monumental.
When I was still in banking, I had a husband & wife client where the wife would apologize for asking what she called “stupid questions” about the terms and conditions of their borrowing package. She could have silently signed her name to the documents and fretted over her lack of confidence in what she just did, but instead she chose to ask. For her own clarity, her own comfort, and her own peace of mind, she asked. For that, I was grateful; it strengthened our business relationship. When I told them I was leaving the bank, she hugged me saying “I’ve never hugged a banker before!” I replied with a wink, “I’m not REALLY a banker; just a farmer who’s working at the bank!”

Employees

Everybody is rowing their own boat in life. It does your business no good whatsoever if your employees are not rowing in the same direction as you. Setting goals and expectations for your team, and sharing the overall business goals with your team can carry significant weight in efforts to get everyone “rowing the same direction.”
I’ve learned about a number of farm businesses that have taken the proactive approach: involve the team in goal planning, provide regular feedback, reward good performance. The most successful farms treat their employees not like employees, but rather like trusted partners who have a vested interest in the success of the business, and communicate with them accordingly.

Family and/or Primary Relationship

I will go on record saying that all “problems” in family and/or primary relationships will trace back to communication. Whether communication be the final straw or not, communication likely led to the behavior that became the final straw.
I was very impressed in meeting a young farmer earlier this year. When he came home to farm a decade or so ago, with his would-be wife, his father made clear with him and his non-farming siblings how the farm would transition. There was no ambiguity; no one could complain; there are no hard feelings today. Consider how things could be today when we acknowledge how successful this farmer now is, and how much wealth he has built in his operation…lack of communication could lead to unreasonable demands from family members, and the potential for critical state.

Direct Questions

Does fear ever affect your communication? How do you manage it?

How would you rate your ability to share positive feedback versus negative?

From the Home Quarter

Lack of communications, or an inability to communicate, will lead to critical state in a sneaky kind of way. If one doesn’t notice that communication is breaking down, over time it will snowball into a major issue. Everybody has a breaking point. It’s usually wise not to let things get that far, not matter which relationship we talk about.