Are conditions favorable on the outside? When I say “outside” here, I mean looking at the factors that could impact your decision to expand that are outside of your farm – external to it. This means looking into everything from interest rates to the going prices or rents for land in your local area to the broader world economic outlook for agriculture. The overarching question you’re trying to investigate is whether it appears to be an opportune time – from a “big picture” perspective – to expand your operation. Is the economic environment favorable right now if you buy or rent new land? How about in 2 or 3 years? What might things look like then?

Are conditions favorable on the inside? This is where it comes in handy to know your operation’s financials inside and out, or to work closely with an advisor on that. Get a clear handle on exactly where your operation stands in terms of key financial metrics – and your farm’s recent trends on those metrics. What does your farm’s working capital and equity look like? Run feasibility studies to get a future look at where your operation would stand if you were to rent or buy a certain piece of ground that you’re considering. What does that new land do to your overall numbers – the bottom line, as well as other indicators of how well your operation could withstand a downturn in the commodity cycle in the near term?

Can we take efficiency to the next level first? When considering expansion, always look within your operation for ways to fine-tune and become more efficient. Sometimes doing this can impact your farm’s bottom line more than you’d initially think! In a way, becoming more efficient across all areas of your operation can – in some ways – be more effective than trying to grow by adding acres, because you’re not adding any new costs that cut into revenues. You can work with an advisor to get efficiency ideas specific to your operation.