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“How is my farm doing?” Financials tell just part of the story

Weldon Schloneger/Getty Images/iStock cornfields on the rolling farmland north of Schuyler, Nebraska.
Go beyond just bushels – how can your farm achieve best profitability per unit?

One of the easiest things to look at when you want to answer the question, “How is my farm doing?” is to look at the farm’s financials, especially the bottom line. While it is a good idea to follow and keep track of the farm’s financial numbers, there’s usually more to the story in terms of how the farm is really doing.

The danger in only focusing on the farm’s financials when thinking about accomplishment is that the farm’s leadership could miss some key things that greatly impact the level of success the farm is able to achieve.

What brings success

It can be helpful to consider the top five or so things that will most greatly impact the farm’s success. In other words, if these few critical things are done really well, the operation will more likely to achieve the financial goals that have been set.

This doesn’t mean that metrics aren’t important. In fact, it’s helpful to have relevant metrics in place to measure progress toward goals so leaders can make any necessary adjustments. However, not all of the metrics will necessarily be financial in nature, but might measure something else: efficiency, for example.

Steps to take

First, consider the top things that will help your farm reach the goals and success you envision. Try to move beyond thinking about how to grow more bushels toward a mindset of how your farm can achieve the best profitability per unit instead. This can get your mind in a different zone, thinking about goals that are oriented toward increasing efficiency or improving processes. Then, you can begin thinking about what you can do to improve your farm’s performance in those key areas or aspects.

Once you have set goals for each area, then create metrics that will measure how your farm is doing in each one.

Some aspects might be more difficult to create metrics for – such as a goal of improving relationships with landlords. For these goals, you can get creative on how to best measure progress and improvements, according to the needs of your unique operation. Maybe you measure it through some combination of how many times you communicate with each landlord per year and how many landlord relationships are improved in some way (that needs to be defined individually by your operation).

Bigger picture

Focusing on these key aspects of your operation can give you a more complete picture of how your farm is doing, especially throughout the crop year when the financial outcome of the year is still unknown. Measuring these other areas can help bring real improvements in parts of the operation that will ultimately bring about the financial numbers and success you’re working toward.

One of the critical areas in every operation is how the farm is going to successfully bring in revenue through marketing the crop – but this can be a challenging aspect for many farm leaders. To get a market advisor to walk alongside you through your marketing decisions or to get a free trial of our market information service, visit www.waterstreetconsulting.com.

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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