inaction

Critical State – Inaction

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Inaction, or procrastination as it is sometimes called, is the antithesis of entrepreneurial success.

It is true that there are many other factors that can contribute to a lack of success for entrepreneurs, but in farming, the effect of inaction can have immediate and catastrophic consequences. When we opened this dialogue on Critical State, a list of excuses for inaction were provided: not monitoring bins; too cold to haul grain; can’t scout the crop for bugs/disease, we’re at the lake. We all know of these circumstances, and others, as exhibited by our neighbors, shared during a presentation at an industry event, or as we may have learned the hard way ourselves.

If it was someone else’s inaction, we can easily see the effect, quantify the financial ramifications, and then wonder “how could they let that happen?”
If it is our own inaction, we downplay the effect and the financial ramifications, and then bemoan our “bad luck.”
This is not meant as a condemnation. It’s just human nature.

In my work with my clients, I encourage (almost to the point of insistence) that management processes and standardized workflow be developed and implemented. Consider for a moment virtually any business you deal with ever. Here are some examples:

  • Your crop inputs supplier has consistent procedures surrounding safety, receiving & storing inventory, and invoicing.
  • Your grocery store works within minimum and maximum inventory levels on a week by week basis.
  • Your accountant follows a standardized workflow for receiving, sorting, & compiling your information, and for preparing your financial reports.
  • Your favorite restaurant has a protocol for greeting patrons, seating them, & ensuring they are eating in a reasonable time, not to mention criteria for food quality, safety, and handling.

Following a set plan of action almost completely eliminates the risk of inaction. Grain will never heat in a bin if you check it on a set schedule with a short frequency. Crop pests and disease will not bring catastrophic damage to your crops is you scout regularly with a short frequency. And yes, hauling grain in very cold weather is not fun and it does bring about other unpleasant challenges. However, if you, or someone you know, has been unable to move grain on time due to no space at the elevator, no trains, etc, then you know how that can affect cash flow, which leads to late bill payments, or poor revolving of the line of credit, etc. If that LOC has an interest rate penaly for late payment, your profit could disappear to cover that interest penalty. Still think it’s too cold to haul grain?

Direct Questions

Every decision has consequences, be it positive or negative. How do you accurately weigh the consequences when making operational decisions?

Describe how the pleasure of inaction now is more positive than the risk of harm later.

How do your operational decisions impact your financial outcome? If you have trouble making this connection, please call me immediately.

From the Home Quarter

Entrepreneurs are renowned for their tenacity and vigor in achieving their goals. Yet many entrepreneurs fail for many reasons, one of which is inaction. But cut yourself some slack: every entrepreneur does not instinctively know exactly what to do and when to do it, many need guidance. Enter people like me who help our clients in areas where they are not instinctively excellent. One of my favorite phrases is, “You don’t know what you don’t know.” But being oblivious to better ways can become an excuse for inaction. As a farmer, you take far too much risk for margins that are too thin and unpredictable to leave anything to chance.

ready-for-harvest

Change, Risk, and Fear

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Change brings risk. Risk brings fear.

 

“Risk and the appearance of risk aren’t the same thing.

In fact, for most of us, they rarely overlap.

Realizing that there’s a difference is the first step in making better decisions.”

Seth Godin’s Blog – Apr 18, 2016

 

Change is the only constant in life. Charles Darwin is often credited with saying, “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”  There is no question that when it comes to production practices, farmers’ ability to change is very apparent.

Now if that would only apply everything…

There is a change on the horizon that almost every farmer will face: how to adapt to life when he or she is no longer farming. That tune has been sung, and will continue to be sung until the message gets through. Yet, by the relative inaction of most farmers to address succession, or transition as it is often called, it is easy for those of us beating the drum to ask, “Why aren’t they getting the message?” I’m less sure that the message isn’t getting through; I’m more convinced that it is the act of facing change that harks fear into the farmer.

Risk, on the other hand, is something every farmer has an appetite for. Without it, one cannot farm. The act of dryland grain farming in its simplest form carries more risk than most non-farmers could even comprehend. Contrast that to the risk that many farmers take in relation to cash flow and debt, and I have to question their comprehension of risk.

One will not fear what one perceives as zero risk. Lacking appreciation for the financial risk from decisions that will strain cash flow and debt levels is why there is little fear of that risk. Lacking action on addressing farm transition is based on a perceived risk.

“Risk and the appearance of risk aren’t the same thing.” The financial risk that many farms put themselves in stems from the LACK of the appearance (inability to fully grasp) of risk. The avoidance of the farm transition discussion is a result of the appearance (created in one’s own mind) of risk. In both cases, the real risk is not considered, but the appearance of risk, or lack thereof, is given full credit.

Direct Questions

What is the REAL risk of farm transition activities? That the next generation won’t do it as well, or the same as you…? (HINT: your dad felt the same way when you took over and you did just fine!)

If you believe a risk does not exist if you do not acknowledge it, explain how that same theory would work with your spouse or children?

Fear is a very real motivator, or demotivator. How do you go about understanding the risk to mitigate the fear?

From the Home Quarter

With change, there is always risk. Risk has an effect on everything we do, whether the risk is real or perceived. The fear of negative (or undesirable) outcomes can be crippling. It is easy to see how change can bring immediate crippling fear now that the connection has been made.

Change the way you look at risk, and you’ll have less to fear.

 

borrowing-binge

Borrowing Binge: At The Farm and Beyond

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Last week, I was emailed an article by Rob Carrick of The Globe and Mail. Carrick writes about Canada’s borrowing binge; no not our federal government deficit and growing debt, but Canada’s household debt. Let’s see how it applies not only to household debt, but farm debt.
**NOTE: Carrick’s article is below in italics, with my comments inserted in bold.

“It’s getting harder to see anything but a messy ending for Canada’s household debt binge.

This isn’t the beginning of a lecture on reducing your borrowing. It’s more a resigned observation of human behaviour. You can warn people to act now to avoid a potentially bad outcome in the future, but they’re not likely to do anything unless they see trouble dead ahead.

The second quarter of 2016 was a vintage moment in debt accumulation. Incomes rose, as Statistics Canada puts it, “a weaker-than-normal” 0.5 per cent, while household debt growth clocked in at 2 per cent. This is the Canadian way – keep debt levels growing ahead of gains in income.

On two counts, this is bad personal finance. Your household spending flexibility is negatively affected in the short term (you have less money to save, for example), and you’re more vulnerable to financial shocks ahead, such as rising interest rates or an economic decline that kills jobs. Clearly, most people aren’t worried about these risks.”

What risks make you worried about your debt load? Can you control them (ie. fusarium, sclerotinia, excess moisture, interest rates, commodity prices?)

“The explanation starts with the fact that we live in a world in which conditions for borrowing are as good as they can ever be. Interest rates are low and the economy, while tepid, is producing enough jobs to prevent unemployment from becoming a big issue.

In the field of behavioural finance, there’s a term called “recency bias” that describes what’s happening here. People are looking at recent events and projecting them into the future indefinitely. So far, it’s working. We’ve had low rates and a slow-moving but stable economic for years now, and there’s no sign of imminent change.”

“Recency bias” describes the not so distant thinking that canola wouldn’t go below $10/bu, meaning that “$10 was the new floor” (circa 2012.) There were many other behaviors and attitudes that came with that thinking. How quickly forgotten are the years of poor quality and inconsistent yields…

“Under these conditions, there’s no reason to heed the repeated warnings from the Bank of Canada, economists, finance ministers, credit counsellors and personal-finance columnists about the dangers of taking on more debt. And so, the ratio of household debt to disposable income hit a record 167.6 per cent in the second quarter, up from 149.3 per cent in the second quarter of 2008.”

Is there a reason to heed the warnings from ag economists, management advisors, and creditors about the dangers of taking on more debt….? Depends how much debt you currently carry. 

“Recent warnings about debt levels give us an idea of what could happen if there are any economic shocks ahead. The credit-monitoring firm TransUnion said earlier this week that more than 700,000 people would be financially stressed if rates went up by a puny quarter of a percentage point, and as many as one million would be affected if rates went up by a full point.

The Canadian Payroll Association recently surveyed 5,600 people and almost 48 per cent of them said it would be tough to meet their financial obligations if their paycheque was delayed even by a week. Almost one-quarter doubted they could come up with $2,000 for an emergency expense in the next month.

These reports highlight some of the risks of the borrowing binge we’ve been on for the past several years, but not all. Decades down the road, we may find that people didn’t save enough for retirement in the 2010s because they were so burdened by debt. Student debt levels might rise in the future because parents weren’t able to help with tuition costs.”

An interest rate sensitivity test would answer this question for your particular operation. But more important that interest rates, which in reality are unlikely to experience any significant increase in the short-medium term, is income volatility. The debt payments won’t change, but a farm’s ability to make those payment will. If the debt payments can only cash-flow when yields and price are at high points, there is trouble ahead.

“That second-quarter data from Statscan show clearly how deaf people are to warnings about the dangers of debt. In the worst three-month period since the recession, economic output fell by an annualized rate of 1.6 per cent.

The reaction of employers to this economic dip can be seen in the fact that income growth was weaker than normal in the second quarter. Consumers barely flinched, though. They’re impervious not only to warnings about the dangers of high debt levels, but also to periodic bouts of economic volatility like we saw in the second quarter. Only a big shock will get their attention.

There’s no point trying to forecast when a shock will happen, but what we do know for sure is that the financial and economic conditions of today will change. We remain in an adjustment phase following the financial crisis and recession late in the past decade and it’s far from clear what the new normal will be.

Things could get better for the economy, or they’ll get worse and jobs will be vulnerable. Either way, people are going to have to make stressful adjustments that they could have avoided by reducing debt today. This could get messy.”

From the Home Quarter

It has been well documented that farm debt in Canada is high. In the next breath, there is all kinds of spin added to the argument such as stating current debt in 1982 dollars so as to compare to the carnage that was beginning 34 years ago. Not to try to deflate the validity of constant dollar comparisons, but the cold hard reality is that existing debts, today’s liabilities, need to be paid back. Compare the situations all we like, describe how “things are different now;” either way, no matter how you slice it, current farm incomes need to pay present day debts.

So when I hear of lentil yields often coming in at half of expectation, when I hear of wheat and durum crops again decimated by fusarium, when I hear of malt barley crops grading as feed because of all the rain, I can only hope that those farms who experience such production results this year are not over-leveraged. Is this a hint of “the big shock” Carrick wrote about, as it would apply to agriculture? Or is that big shock something already on the radar like China slamming the door on Canadian canola that doesn’t meet spec?

The borrowing binge at the consumer level, as Rob Carrick wrote about, could have drastic implications on the Canadian economy; his words also apply to agriculture. We could be in for a rough ride, “this could get messy” as Carrick wrote.

Sage words from a 30+ year farm advisor: “Take your worst net income over the last 10 years and measure it against today’s debts. How do you feel?”

If you don’t feel good from that experiment, please call me or email for strategies to help ease the discomfort.

swathing-canola

Making Noise on (Emotional) Business Decisions

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There has been a lot of noise this week about canola seed prices for the 2017 crop. Figures as high as $700 per bag (about $14/lb) for a sclerotinia resistant variety have been thrown around. As a moderate fan of Twitter,  I had to laugh at one particular tweet from @DavidKucher: “I’d have to #SellTheSwather in order to afford next year’s Invigor seed price increase”. This, of course, refers to the now popular production practice of straight-combining canola versus the traditional practice of swathing then harvesting.

This opens up the perennial challenge for farmers: costs are increasing with no guarantee that production prices will increase as well, margins become questionable, and emotional decisions get made. Is it better to keep the swather and plant cheaper canola seed? Or follow through with straight-combining canola, sell the swather, and grow the expensive variety that works better with straight-combining?

Aside from the cost/benefit sermon that would fit very well here, I believe that the real issue is differentiating between emotional decisions and informed decisions.

While I could go into a diatribe that includes harping on the how and why, instead, I’ll offer a list of questions that may help you determine whether or not to “sell the swather.”

  1. Will the more expensive seed provide enough extra yield to offset the added cost?
  2. Have you included the savings to your operating costs from eliminating the expense of swathing the crop?
  3. Does that saving to your operating expense include staff costs for you, or hired help, to run the swather?
  4. Have you considered the cost of owning the swather, and how eliminating it affects your fixed/overhead costs?
  5. How have you substantiated (actually measured) the seed loss from straight-combining and compared it to the loss from swathing?
  6. How cheap can you get new canola seed without sacrificing yield?
  7. What other benefits are you prepared to relinquish by opting for cheaper seed?
  8. Which canola variety matches your crop rotation, pest pressure, and operational timing & strategy?
  9. Which canola variety is most profitable?
  10. If you literally need to sell the swather to afford canola seed, can you see that there are bigger issues at play?

Selling assets to generate sufficient cash to cover operating costs is the beginning of the end. Selling assets that are minimally used to free up cash & leverage that could be redeployed elsewhere is a good strategy.

The answers the questions above are yours, not mine. There is no solution that I am prescribing by posing those questions. The solution will come from your answers. What I am prescribing is taking the time required to make informed decisions.

From the Home Quarter

Emotional decisions, made in haste, like shooting from the hip, will offer benefit…to someone…but not you.

Informed decisions keep you in control, on plan and on task, by ensuring there is benefit to you, your business, and your family.

For personalized guidance on determining if selling the swather is the right decision, call or email and ask about our Farm Profit Improvement Program™.

 

Crop Failure

Critical State – Crop Failure

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Do you have the financial strength to survive a crop failure?

Considering that most farmers are still primarily production focused, there is likely no greater catastrophe in their mind than a crop failure. With Mother Nature offering challenging conditions every year (even 2013 which had a strong majority of farmers enjoying “the perfect growing season,” there were still many areas that faced insurmountable weather challenges) one would think that prudent risk management would involve many of the following strategies, each with a prescribed weight based on each farm’s specific need.

Provincial crop insurances, Agri-Stability, private revenue insurance, hail insurance, etc. are the most popular risk management tools used by farmers today. Most farms use one of those, or a combination of several. Each farm’s weighting of the various programs will be as unique as each farm. However, many farms use none of these risk management tools. They will each have their own rationale for why. Some are so well capitalized that they can self-insure, take the financial hit from poor production and keep on rolling. Others do not understand how the programs work, and because of their ignorance, they choose not to take part. In the middle is the majority, broken into two parts: one that clearly understands the nuances of each program, and utilizes it to the fullest, most prudent extent (which might mean not using them at all); the second does not bother to gain such understanding and simply does what’s always been done year after year.

There are four distinct factions described above in how many farmers approach risk management. Which one do you fit into?

  1. Well Capitalized, avoids using the programs: you have abundant savings and working capital to withstand more than one year of zero, or near zero, gross revenues and choose to eliminate the premium costs for risk management programs.
  2. Lacking full comprehension of programs, avoids using the programs: you feel that they are too complicated, too expensive, and never pay you.
  3. Intimate understanding of the programs, uses (or does not use) the programs to the best net benefit to your farm: you know the ins and outs of the program(s) better than anyone who answers phones at the respective help desks. You carefully weigh premiums, coverages, and benefits with precision so that all match beautifully with your production practices. This may include not using the programs because the cost-benefit is not sufficient.
  4. Not bothered to learn about program nuances, uses (or does not use) the programs because “that’s what we’ve always done”: you don’t have time to read through the acres of lingo and jargon that are provided to you, so you just blindly take the same coverage you’ve always taken, or not taken any coverage at all. “Just go with what we did last year!”

Of course, these groupings ignore the geographic issues in that, for example, some farms span so many miles that a hail storm is incredibly unlikely to affect the entire farm, some farms are so large that program premiums can represent a small fortune, and some farms (large acres or not) are in such tight proximity that weather risk cannot be “spread out.”

Direct Questions

Which category above do you fall into? If it is #2 or #4, what is your risk management approach?

Do you prefer reliance on risk management programs over building strong working capital? Why?

Production is critically important. How do you manage the risk of crop failure?

From the Home Quarter

Farming is risky business, and the risk of losing a crop can bring a farm to the point of Critical State. How we manage the risks, and in this discussion, the risks pertaining to crop failure deserve attention that is paramount. What certainly gets most of the attention when it comes to managing the risk of a crop failure is inputs. And while there is no arguing the importance of doing all you can to produce the highest yield and best quality crops, there is more to the equation. Much of what will bring success or failure to your efforts in production is out of your hands.

The only way to get off the train of risk management programs (and cash advances, and trade credit, and operating credit) is to build abundant working capital.

You cannot shrink your way to greatness and you cannot spend your way to prosperity.

Overspending

Critical State – Overspending

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Cash in the bank is a good thing. Spending it because it is there is the scourge to many farm’s financial strength.

Years ago, when I was still in banking, I was doing what can be argued young bankers should, or should not, do…I was listening intently to some well tenured, long-in-the-tooth bankers. It was good because of the insights they brought. It was not good because of the cynicism they had. One cynical comment in particular stayed with me; it was when that grizzled old banker said, “Farmers hate having money in the bank…as soon as it’s there, they go spend it!”

Maybe that comment showed his lack of insight into how a farm business is run. Maybe he was fairly accurate in his conjecture in how it relates to the psychology and mindset of a farmer. Although, I believe that “hate” is the incorrect descriptor for how farmers really feel about cash.

You may recall reading Spending Less is More Valuable Than Earning More in this commentary a few months ago. I regularly read comments in ag publications and on Twitter about how “farmers are good at making money, but trying to keep some is the hard part.” Not for everyone…

Investing in your business is something not to be taken lightly. Every year, month, week, and day, farmers battle with the decisions of what to grow, how to fertilize it, what to spray, when to spray it, etc. With almost the same frequency, many farmers are also looking at the tools to get the job done (ie. farm equipment.) “Newer, bigger, better” seems to be the name of the game when it comes to equipment. And less frequently, farmers consider expanding the land base. Whether to rent or to purchase is but one of the questions pertaining to land.

It is my belief that the issue of overspending would not be an issue if more discipline was used in ensuring that all expenditures met an ROI (Return on Investment) threshold. I’ve learned about the following instances in the last year that clearly show a lack of understanding the concept of ROI:

  • disastrous chickpea crops despite as many as 6 fungicide applications (at $15-$20 each, that’s an extra $90-$120/ac in inputs)
  • $90/ac rent paid on 640 acres that has only 420 acres available in the entire section due to excess moisture (so he’s actually paying $137 per cultivated acre)
  • inability to make loan payments because the operating line of credit is maxed out.

I have gone on record many times in my prognostication that credit, specifically operating credit, will be difficult to maintain (and likely impossible to get) in the not-too-distant future. Those operations that do not run on cash, therefore relying on operating credit, will face insurmountable hardship when credit policy changes.

Control your own destiny:

  1. Build working capital reserves, specifically CASH;
  2. Discontinue relying on operating and trade credit to cash flow your farm;
  3. Sell your production when it meets your profit expectations instead of when you need to make your payments (cash in the bank allows you to do this!)

Direct Questions

How would you describe the rationale employed when determining how to deploy resources, specifically cash?

As a percentage of your annual cash costs, what is your minimum cash balance to keep on hand?

From the Home Quarter

In a business within an industry that is renown to have multiple cash and cash flow challenges, it is not unusual to learn that adequate (or abundant) cash on hand is not common. And so when cash is available, the need (or temptation) to upgrade this or replace that can be too much to handle. Disciplined decision making, backed by a sound strategy, is often the difference between successful, highly profitable farmers and surviving, occasionally profitable farmers. Which would you rather be?

For guidance, support, or butt-kicking in developing your strategy, and the discipline to stick to it, please call or email my office.

Redmans

Vision (by guest contributor, Dean Robinson)

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Preface:

The following is provided by a guest contributor, Dean Robinson. Dean is a principal in the firm Redmans, a family business advisory practice in New South Wales, Australia. Dean and I are part of the same community of professionals and became instant friends at a recent event. Dean’s recent blog post, Vision, hits home as it relates to strategy and execution in family business. I hope you enjoy!

– Kim

=====================================================================================================================================

One of my big criticisms around modern Australian politics is that we no don’t have a clear vision for where Australia is heading as a country. For me, the Hawke, Keating and Howard Governments were all clear on vision. Each government set a future, then trod down the path towards it. Yes, there was some anguish. At times, decisions were made that were unpopular. However, in each of those governments, we had Prime Ministers who saw the bigger picture and understood there would be hiccups along the way. In my opinion, the years since 2007 have been devoid of the big vision.

Which leads me to family business. Unfortunately, too many of them are also unclear on their vision. They unlock the doors each day, take all comers, deal with issues like the Rural Fire Service deals with a bushfire outbreak, then lock it all up at the end of the day, ready to do it all again tomorrow.
In many respects, you can boil this down to three problems:

  1. Lack of a clear business strategy; or,
  2. If there is a business strategy, lack of implementation of it; or,
  3. If there is a business strategy, and it has been implemented, a lack of commitment to it.

A business that lacks a strategy doesn’t know where it is going, an obvious statement I know. However, the number of family businesses that lack a clear and documented business strategy is surprisingly high. This means they’re running all over the place, usually being all things to all people and creating stress for themselves in the process.
If a family business has developed a business strategy, the place where it falls over the most is in the implementation phase. Any client we have worked with on the development of a strategy that says they don’t need our help to implement it has always failed to implement. Without exception. Once the strategy planning day is done, they go back to what they’ve always done, which is generally be reactive. The only thing that works for implementation is accountability. Plenty of school children would not do their homework if they didn’t have to hand it in the next day. The same applies for family business owners.
Finally, if there is a strategy and it has been implemented, any lack of commitment to it from anyone in the management team can de-rail it. Everyone needs to be on board with the direction. If your business strategy is to produce widgets, you gear your factory up to produce more widgets, then find that you’re really not that interested in the widget market after all, you’ve just blown significant resources in the business and potentially taken resources away from parts of the business that work.
My questions to you are:

  1. Do you have a clear strategy for your family business that you can articulate succinctly and with passion?
  2. If you have a strategy, what is your process for implementing it and who is holding you accountable?
  3. If you have a strategy and have implemented it, is anyone undermining the strategy? If so, what are you doing to bring them to account.

This Week’s Tip

Lack of Strategy = lack of direction.
Lack of Direction = business anarchy.
Anarchy – a state of disorder due to absence of non-recognition of authority or other controlling systems (Oxford Dictionary.)

 

 

canola field

Critical State – Debts Get Called

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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.

Goals and Strategy _corn rows

Goals and Strategy

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Never trade what you want most for what you want at the moment. It only leads to failure.

Those are profound words. While “failure” is not absolute, I believe in this perspective failure means “failure to reach your goal.”

What is your goal in business? What are you working for? Some business-people in primary production agriculture have defined their goals: one aggressive young farmer I know has made it clear that his goal is “to leave the land for the next generation in better condition then when he got it.” His desire for a newer tractor or more land never trumps his goal, and therefore his decisions reflect his goal.

I often speak to farmers who describe their goals as ” reducing debt” and “improving profitability” yet they trade those goals, whether consciously or unconsciously, for what they want in the moment (typically additional equipment)…which usually increases debt and can often have an adverse effect on short term profitability.

Does that mean the farm will fail? Does that mean the farmer is a failure? No. It means that there is failure is reaching the goal of reduced debt and increased profitability.

This leads me to circle back; ” What is your goal in business? What are you working for?”

We touched on this a few weeks back in Growing Farm Profits Weekly – Eat to Live or Live to Eat. It is no one’s place to tell you your goals are wrong. Just be honest with yourself about what’s really important, and expects results accordingly.

I work with farmers who acknowledge the need to have strong business goals that align with their personal goals. All of them are grateful to have some help to clear the air when making decisions and to take the emotion out of the equation. I have done the same in my own business: I have an advisor who I’ve hired to help me wade through the issues, and the emotional roadblocks, that could potentially affect my business.

Here are the Growing Farm Profits™ 3 Keys to Reaching Your Goals:

  1. Start with with a goal in mind, and set tactics later. Starting with tactics enters into a never-ending cycle.
  2. Plan for adversity, strategize how to adjust, and respond as required.
  3. Stay on course; get any and all help you need to keep from straying off the chosen path.

Direct Questions

What information do you need to allow you to clarify your business and personal goals? Who is helping you get it and sort through it?

Who do you lean on to help strategize when mapping your business and personal goals?

How do you manage the desire to trade what you want most for what you want in the moment?

From the Home Quarter

It is not unusual for farmers to get caught in the cycle of “head down, shoulder to the plough, get the work done, plant the crop – harvest the crop – sell the crop – repeat.” And after 20-odd years of doing just that, and finally looking up, most find that they’ve built something they never expected or planned for. Now facing the thought of planning for life after farming, many are asking “What now?”

Beginning with an end goal in mind is a critical key to successfully reaching that goal. Stay on course, and do not trade what is wanted most for what is wanted now.

failure to communicate

Critical State – Inability to Communicate

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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.