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emotion

Emotional Decisions: Business’ Achilles Heel

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I bought a used truck last week. Since I am no longer actively farming, I decided that my beautiful ¾ ton
diesel was more truck than I needed. It took me 2 years of searching to find that truck, so some people
are astounded that I would be selling it. It was still a terrific truck, and had nothing wrong with it.

During my search for another truck, I learned bits of info here & there about the good, bad, and
otherwise regarding the models I was interested in. It’s always a challenge to sort through the noise of
those who are die-hard loyalists who cannot see anything adverse about their brand and of those who
are inherently negative and cannot find anything good to say. How does a person decide?

I wanted the replacement truck to be in the 2011-2013 range. I faced the same challenge we all face
when considering a major purchase: can I find what I want within my price range, do I accept less than
what I want to stay within my price range, or do I pay more than I planned to get what I want? In the
modern age of “instant gratification,” our society typically pays more than planned.

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While some options on my list were important, others weren’t. When considering the Ford F150, I was
firmly on the fence over engine options: 5.0L or EcoBoost? As mentioned earlier, there is a lot of noise
about these engine options. I found a consistent message between 2 salesmen and felt that was the
most honest feedback I have come across. When describing what I need out of this truck, and why I was
on the fence, one salesman replied, “Well you’re just taking the emotion right out of this decision, aren’t
you?”

Yes. Yes I am.

The fundamentals of what makes a good decision are often clouded by emotion. We get so caught up in
the “want” that we blow right past the “need.” And since we as a society will typically pay more than
planned to get what we want, it creates a perfect storm. This storm has eroded balance sheet equity for
many, and left others upside-down on vehicle & equipment loans, but always negatively impacts cash
flow.

Direct Questions

How often have you let emotion take over your decision making process?

Do you avoid making a business case for each decision because it will prove the emotional argument to
be the wrong one?

What impact are you feeling from past emotional decisions?

From the Home Quarter

Removing emotion from business decisions is a key benefit that my clients enjoy. It allows my clients to
experience greater confidence in their decisions by having me filter through their emotions. I am not on
your farm each day, so the emotion of why you’re making the decision is not felt by me, thus allowing
me to see through it and keep you on track.

The truck I sold was rare because of its features and options. It had incredibly low kilometers for its age,
and needed nothing (I’d been through it front to back over the last 2 years.) What I felt for this vehicle
was almost on the verge of love (although I have never “loved” or “named” any of my vehicles, ever.)
And while it held a special place with me, it’s a truck, a tool, an inanimate object and completely
replaceable. I sold it when I did because I knew I could get maximum value for it now. A year from now
would be significantly less. It was advertised on Friday afternoon, it was sold by Saturday, and picked up
Monday. I found the truck I wanted the Thursday before, and picked it up a week later. I took the
emotion out of the equation.

Allowing emotion to influence your decision making is like putting on blinders: all that can be seen is
what you “think” you need and no other options appear available. Let’s take the blinders off, remove
emotion from the equation, and see if we can make a business case that offers an appropriate ROI.

If you’d like help removing emotion from the decisions you make for business and personal success,
then call me or send an email.

doit

Getting It Done

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Alan Weiss is my mentor’s mentor, so naturally I subscribe to Alan’s work. One of Alan’s recent
newsletters contained a short piece about The Human Condition: Procrastinating.

Let’s be honest, we’re all guilty of it at some point. Alan writes, “We procrastinate out of sloth (I don’t
want to get up); out of fear (what if it’s not good enough); out of lack of consequences (they won’t do
anything about it); out of ignorance (I didn’t know there was a financial penalty after that date). We all
do it, it’s not a matter of obliterating the habit, it’s a matter of priority.”

While all of the farmers I speak with (be they clients or not) have never procrastinated at getting
equipment ready for the field, many admit to procrastinating when it comes to management of their
business data, analyzing information, and pretty much anything to do with bookwork.

Is procrastination a matter of priority and not habit? No argument that doing books isn’t a lot of fun;
shuffling paper in an office (or at the kitchen table) isn’t a task that everyone is fighting to do. Yet it is
clear to all of us that there is significant, sometimes immeasurable benefit to keeping our business
information current and up to date.

I am very proud of one of my clients this week. He was facing a very uncomfortable situation that will
lead to further discomfort as time goes on. We had discussed an idea or two to possibly defer the
immediate pain, but in the end, he chose not to procrastinate. He faced this situation head on and took
what was coming his way. We’re working hard to deal with it even though seeding is ready to start on
his farm. He realizes that while getting the crop in the ground is highest priority, there is no benefit to
allowing this unpleasant situation to fall lower on the priority ranks. His approach to handling these
issues is an example for everyone.

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Direct Questions

Do you give yourself permission to let unpleasant tasks slide down the priority list?

Are you aware of the potential gains missed, or losses realized, from not giving financial matters greater
priority?

Are you allowing your conflicting priorities to pull you left when you need to go right?

From the Home Quarter

I make it my business to ensure you are keeping your financial management data up to date, current,
and usable in real time. Six-month old information is not valuable when making business decisions
today. Would you write a cheque today based on your November bank statement? I help farm
businesses realize the priority that needs to be placed on financial management practices and help them
understand the financial ramifications of improved or decreased efforts in doing this critical
management function. Alan Weiss writes, “I’ve never procrastinated about eating the lobster that I
ordered. We ought to treat our priorities in life the same way, as a great meal that can spoil if you just
let it sit.” Managing your farm’s information is certainly not akin to a lobster supper, but both will spoil if
you let them sit.

Keeping your information managed and up to date is a lot less painful that what my client faced this
week. He made it a priority when he didn’t have to. What’s your priority?

If you need help in prioritizing your financial management functions, determining your
True Cost of Production, identifying opportunities to reduce operating & overhead costs, or applying
analysis to your management data, then email or call me.

information

How Good is Your Information?

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I’ve been staunchly encouraging (ok, pushing) my clients to up the ante on how they manage their
business information. As we look at 2015, it is clear that opportunities for profit will be harder to find
than in years past and we must use every tool at our disposal to make the best decisions possible.

Enter data management.

Why do you think retail spaces are designed the way they are? It comes from the retailer devoting
incredible resources to study the habits and behaviors of its shoppers. They take that information and
then design spaces in such a way that plays to the habits and behaviors of their shoppers so as to put
the desired products in front of their shoppers at the desired time and place during the shopping
experience. For example, they have learned that typically shoppers turn right versus left as soon as they
enter a store, and thus plan their store layout in a way that panders to a shopper’s subconscious
behavior AND the retailer’s intention to sell high margin items. Maybe it’s that shoppers turn left and
not right, but you get the point, so who cares? Business cares, that’s who.

Like that retail giant, you have the ability to make important business decisions based on specific
management data. You would use your historical agronomic data to decide which crop offers the best
profitability on each specific field (relative to rotation.) You review historical financial statements to
measure actual results versus projected results. You analyze soil test reports to determine how much
residual nutrient remains in your soil before making fertilizer purchases. This could go on and on.
I spend a lot of time working on True Cost of Production calculations and building Profit Curves for my
clients. I can only do a precise job with complete and accurate information. And when you’re using that
work to make important business decisions, it is imperative that you provide usable and accurate info.
The retailer will often hire out the collecting and compiling of data as well as the analysis and the
creation of a final report with recommendations. The final report can only be as good as the quality of
the data collected. The retailer could invest millions of dollars based on the information in that final
report.

Your business is no different: you collect and compile your own data; if you need the help, there are
qualified advisors available to help you decipher it and provide recommendations; you are then more
confident in future business decisions because you make the most informed choice available.

I am often asked for suggestions as to which data management platform to use. I liken it to exercise: you
can run, bike, jog, swim, whatever…as long as you’re exercising. Same with your farm data, there are
many platforms available; find the one that feels best for you…as long as you’re using it.

Direct Questions

Does your data management practice include data as precise as pounds of nutrient per acre by crop?
Are you retaining records of historical information to establish trend lines?
Are you recording your data at all, even if it is just a pencil and a ledger?

From the Home Quarter

There’s a lot of noise out there about “big data” and ownership/use of that data, and for good reason.
I’m not condoning the perceived risks relating to big data’s custody and/or use of your info, but in reality
we’ve been letting Google do it to us for a very long time already. Does that make it acceptable? No, of
course not. But do we let that be the excuse to not collect and manage our data? The actual harm done
to our business from not collecting data is greater than the risk of harm from potential illicit use of our
data. The cost of doing nothing in this case is far greater than the risk of doing the wrong thing.
I don’t care if you use a “big data” cloud based platform, or a spreadsheet on your Windows 95
computer. You owe it to yourself and to your business to make the most informed decisions possible.
The best decisions are made with good information. How good is your information?

If you’d like help planning your farm for business and personal success, then call me or send an email.

GFP FI 4

Accounting, You Get What You Pay For

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I am NOT an accountant. Let’s put that on the table right away.

“Do what you have to do so I don’t pay any tax, or at least as little as possible. And nothing fancy is
needed from you, just the basics; keep your fee small.”

Sound familiar? If you’re an accountant, I’m sure you’ve heard this far more than you’d like. If you’re a
business person (in the BUSINESS of FARMING) and you’ve said something like this to your accountant, I
hope this leads you to change.

The work your accountant does in preparing quality historical reporting will provide you, the CEO of your
business, with tools to evaluate actual results against expected results.

What do you mean you look at this info for 10 minutes, forward a copy to the bank, and then file it? I’m
a huge proponent of looking forward (future planning), but if you don’t look back once in a while to
gauge performance, you’re probably going to repeat some mistakes from the past.

A comparison of results year over year and setting trend lines of results can be telling. But this can’t be
done accurately without accruing your statements. Let’s put this in perspective: you sold some 2013
crop in 2014, and carried some 2014 crop into 2015, right? This isn’t unusual, nor is it a bad idea. We
should manage the timing of our grain sales to match our cash requirements. But for the purposes of
evaluating your farm’s financial success in a given year, the grain carryover skews the reporting. Here’s a
way to fix that: accrue your financials!

It’s not a lot of work. All you need to do is assemble your:

  • grain inventory values
  • total prepaid expenses (like fertilizer, chemical, and seed)
  • accounts receivable
  • deferred cheques
  • accounts payable

Provide these to your accountant as they were on the last day of your fiscal year (and for the prior year
if you’ve never done this before.) You have to provide all of this to the bank anyway (or Agri-Stablilty,)
so there really is no extra work on your part.

Before anyone gets all panicky, I’m not suggesting you file your taxes on an accrual basis. Farmers can
still file on cash, so keep that up. Cash reporting for taxes. Accrual reporting for analysis.

Direct Questions

Do you view your accountant as a “necessary expense” or as a “strategic advisor” to your business?
Do you use your financial reporting to analyze actual results against projections?

Is the $2,000 you’re trying to save by “going cheap” with accounting worth the $1-2 million in financing
you WON’T get because your bank has “minimum reporting expectations” in order to approve credit?
Are you currently having your financial statements accrued? If not, please start now. A December 31
year-end can still be accrued. (So can historical statements if you have the info.)

If you don’t measure it, how can you manage it?

From the Home Quarter

Think about all the tools in your shop. Which one is your favorite? Could you see trying to get through a
major task without it? When you’re buying tools, do you shop at Wal-Mart, or do you buy Snap-On?
Your financial statements are just as valuable of a tool. And like any tool, its value is only evident when
you’re using it, not when it’s sitting on the shelf. Are you viewing your accountant like “Wal-Mart” or
like “Snap-On” based on the kind of “tool” you’re asking them to provide? And remember your
responsibility in creating quality reporting; the G-I-G-O rule applies. It’s up to you to provide your
accountant with thorough and clear information.