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Back to basics: Run farm decisions by the numbers

This is especially critical for land and marketing decisions.

On the farm, there’s quite a bit of data now available to us if we want it. Technology has come a long way in helping farmers get information and track just about anything, especially during planting and harvest.

Today I’m not thinking about yields or other data that surrounds production on the farm. I’m thinking about some other numbers that are critical to the success of your operation as well. These are the numbers that paint the bigger picture of what’s going on in your operation.

Basically, all the data and numbers on your farm roll up into your farm’s financials. These numbers are a reflection – but not the only reflection – of how your farm is currently doing. When used to their greatest advantage, up to date financials can become a great asset – in themselves – to a farm leader.

Simple, yet challenging

It comes down to this: One of the most basic, yet most difficult, choices you can make as the CEO of your farm is to run the decisions you’re making in your operation by the farm’s numbers. It sounds simple, but it can become a challenge for a couple reasons.

The first reason is because some decisions we make on the farm can become emotional or emotionally driven, especially if the farm’s numbers aren’t playing a key role in the decision-making process. Without the touchstone of the farm’s numbers – whether actual numbers or projected scenarios – the farm leader can feel like they’re in the dark or just going with a gut feeling.

Some decisions the leader must make are more naturally emotionally charged than others. Or sometimes the situation the operation is currently in can create higher emotional stakes than usual. What particularly comes to mind are decisions tied to land, as well as marketing decisions.

Another reason running the farm’s decisions by the numbers can become difficult is if you don’t have the financial information you need for decision-making in a timely manner, or if that information isn’t organized in a way you can actually use it.

Three keys for decisions

Here are a couple key points to remember when building this into your decision-making process.

  1. Make sure you have the financial information you need, when you need it. If you need to make a marketing decision today, it’s not going to be much help if the numbers aren’t ready for you until tomorrow. It’s worth it to invest in someone who makes sure the right financial information you need will be ready whenever you need it. Also, the information needs to be in the right format for you to actually use it in decision-making – this isn’t the time for raw, ground-level data. You need the birds-eye financial view of your operation.
  2. Stay on top of the numbers yourself, as well. As the farm’s CEO, you need a sense of where the operation is at financially on a regular basis, even during times when that might be tough to look at. This doesn’t need to be super exact but should give you a general idea – so you’re never surprised when you dig into the actual numbers.
  3. For emotionally charged decisions, get a partner. When it comes to decisions that are more emotional – as I said before, decisions relating to the markets and to land come to mind – it can be helpful to have the support and perspective of an outside third party. It’s best if they understand your operation on a deep level and care about you and your operation, but also have the ability to step back and give you a bit more neutral perspective because they’re not actually inside your operation. Our market advisors work with farmer clients as a partner that walks alongside the farm leader as they make marketing decisions for their operation. They help set up plans as well as assist in execution, and act as a sounding board along the way. You can talk with one of our advisors to learn more.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 
TAGS: Management
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