As different types of challenges impact farm operations, the same truth remains – the farms that will not only survive but thrive into the future are the ones that consistently use their financial information to make decisions.
Good financial management skills certainly aren’t a new idea for farms and farm leaders, but their importance has become more and more apparent. Farm operations have dealt with a number of major challenges over the past eight years or so – some coming from inside of ag and some on a more global scale.
Farmers with a business that’s healthy and thriving are often in that position largely because of the approach and actions they take toward their farm’s financials, the importance they place on them and how they choose to use financial data and metrics in their decision-making.
How they do it
The farmers we see with healthy, thriving operations tend to bring the financial view into leadership decisions in a few different ways.
Major purchasing decisions. When it comes to a large purchase – whether it’s a piece of machinery or a more long-term purchase such as land – these farmers look to their farm’s numbers to guide them.
Sometimes it’s easy for emotion to step in and lead to hasty buying decisions, especially when it comes to land or equipment. But the best first step is to determine whether a purchase is feasible for the operation at that time – taking emotion out of the equation and taking time to look solely at the numbers. These farmers let the numbers – rather than a gut feeling – tell them whether it’s the right time to make a large purchase.
Production decisions throughout the season. Another way farmers stay in tune with their farm’s financial reality is by running production-related decisions through financial analysis. This helps them understand whether certain spraying or other application decisions are right for their operation from a financial perspective.
Otherwise, it can be tough to judge whether it will be worth it in terms of yield to spend a certain amount of money on any given crop application in mid-summer. Running an analysis and understanding what the financial cost and potential benefit may look like helps farm leaders make smart decisions in the heat of the moment.
Marketing decisions. If you want to have a thriving farm operation, it’s absolutely critical to connect your marketing decisions with your farm’s real-time financials. The marketing decisions that will be best can vary greatly from operation to operation – because each operation’s situation and needs are uniquely different.
There just isn’t a one-size-fits-all approach that works across the board for farms when it comes to marketing. Farm leaders always need to have current financial information about their operation at hand when considering marketing decisions. The right marketing strategy for one operation could look very different than what’s right for the neighbor down the road, but each of them need to make those decisions using up to date information about their farm’s financial needs and situation.
To get a partner and a tailored approach to marketing plans for your operation, you can get in touch with our market advisors.
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.