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Here’s a different way to compare that can really help.
3 Min Read
Have you ever compared your farm operation to another one? Whether it’s just down the road or across the Midwest, comparison is something that we as human beings tend to do. We might be doing that naturally – but sometimes the conclusions we make aren’t necessarily going to help our farm find success.
Thinking something like “Oh, they farm more acres, so they must be more successful,” isn’t necessarily a true statement. But often, farm leaders can get caught up in that type of comparison trap.
How to know
There are times and situations when comparison can be helpful, if we think about it in the right way. For example, looking at financial benchmarks and metrics for operations of a similar size and type can be one way to gauge how our farm is doing.
Benchmarks and university averages have their place – but they can also sometimes lead us to conclusions that don’t reflect the full reality of our farm operations. Every operation involves a unique variety of factors – like geography, soil types, what the surrounding area is like (rural, urban or suburban), whether ground is owned or rented, how long the operation has been around, number of owners, access to capital and many more factors.
When farm leaders try to compare their operation to others, financial data isn’t going to reveal the full picture. Often, it’s more helpful to look at internal benchmarks and metrics that are hand-picked for your unique operation, rather than comparing yourself to whatever someone else decided to measure.
Three steps
Here’s a simple process to start creating and using metrics on your farm.
Figure out your metric mix. When we think about metrics, we might first think about the financial numbers – how the farm is doing from a purely financial standpoint. That’s a good place to start, but then it’s time to figure out which numbers will be most helpful for you to track. In order to answer that question, you have to know where you’re trying to go – your long and short-term goals for the operation. Working with an advisor for the farm can be helpful to start sorting out your goals and making plans.
Choose your metrics. Once you have your goals for the operation figured out, you can decide which metrics to track over time. It can be helpful to include both purely financial “money numbers” metrics as well as other “non-money” metrics that are specific to your operation as well. Maybe it’s something like landlord satisfaction survey results or employee retention numbers.
Track the numbers. When you have decided on your metrics, figure out how often you will track them. What type of interval will be most meaningful? Maybe you decide to review them quarterly or monthly. Make sure you review at least once or twice a year. This gives you the opportunity to see whether the numbers are on track and lets you compare your operation to your own operation. It can be a lot more meaningful because you see the direction you’re going. That way you can make real-time changes and adjustments to help make the numbers move the way you want – to ultimately reach the goals you have set.
An area of the operation that can greatly impact your goals are marketing and merchandising plans. You can get a partner to help start your farm’s 2021 marketing planning by contacting our market advisors.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.
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