June 27, 2016
David Koupal, a farm business management instructor at the South Dakota Center for Farm and Ranch Management, says he’s noticed several things successful producer do that others do not. They:
1. Develop balance sheets, historical profit and loss statements and projected cash flow budgets. “If you are not currently tracking these documents, you probably will be required to do so in the future,” he says. “When times are profitable, many lenders might not require you to have these documentations. But now that we are entering a more financially unstable economy in agriculture, many lenders will require these.”
2. Write marketing plans. “It is hard to define a marketing plan because the markets can fluctuate so much in a one-day period,” Koupal says. “My suggestion is to talk to a variety of different sources to educate yourself on what options would be the best for you."
3. Acquire hew technology based on return on investment (ROI). “There is a lot of fancy technology out there that gives you no positive ROI. Be very selective on purchasing new technology for your operation. Most ranchers think that new technology is some computer or electrical technology that you can use on your ranch. In my mind, I’m also thinking vaccines. Some of these vaccines might boast a great preventive measure or increase in pounds gained, but what is the ROI?” he says.
4. Aim for high production averages. A high 10-year average production will make you more money than only one high production year out of 10. “Consistency is always more profitable,” he says.
5. Develop annual strategic plans. Each should include a SWOT (strengths, weaknesses, opportunities and threats) analysis.
6. Communicate well. “Without communication in the operation, I see little success. It doesn’t matter if you’re a one-person operation, you still need to communicate with your lender, feed supplier and/or your local vet. Communicate with all of them to find out information that can make you more profitable,” he says.
7. Leverage big data. If you have the computer technology that tracks feed conversion, daily gains or percent body weight weaned, use those data to make the management decision. Too many operations purchase big data, but never take the next step and use it. “Big data and return on investment work hand in hand,” he says.
8. Form advisory groups. Ask people you respect to be part of a team that reviews your operation and offers advice on strategies, investments and other major decisions.
9. Hold themselves and others accountable. “You are going to make mistakes, but learn from those mistakes. If you have other family members working in the operation, set them up to become successful by making them be accountable,” Koupal says.
10. Take time to learn. They value life-long learning and use it to develop better managers for their operations.
For more information about other traits successful farmers and ranchers share, contact Koupal at 605-995-7193 or call Mitchell Technical Institute at 1-800-MTI (684)-1969.
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