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Strategic plans vital for future success

Farm Business: Farm transitions are easier when a strategic plan is in place.

Michael Langemeier

June 3, 2024

2 Min Read
View over a man's shoulder as he writes on a notepad
DO IT NOW: If you’re planning to pass the farm on to your children or another family member, it is a good idea to start working on your strategic plan now. This plan shows everyone where the business is headed. Allison Lund

A strategic plan provides a road map of where your business may be heading in the next five to 10 years. In the parlance of farm management textbooks, you want your farm to do things right related to tactical or day-to-day management, as well as related to strategic management.

Strategic planning is particularly important for farms that have one or more family members transitioning into or out of the operation. Without a strategic plan, transitioning into or out of a business can cause hiccups to the success of the business as well as complicate retirement plans.

Through my work at Purdue Extension, I have run across numerous individuals who tell me their farm has never had a strategic plan, so they wonder why they need one in today’s environment.

I often bring up two points: First, there may have been fewer decision-makers involved in the past and/or the scope of financial resources was considerably smaller. Second, strategic risk, or the risk of being out of strategic position, is arguably greater today.

Another common concern when thinking about strategic plans is that we live in a highly uncertain world. Is forward planning pointless if we fear that our plan may be overwhelmed by unanticipated events and developments? Uncertainty makes forward planning difficult.

I contend this is precisely why you should think about how plans may need to adjust as the internal and external environment changes. For example, how would your farm adjust to an extended period of prices at or below breakeven?

Strategic plan advantages

The first advantage of a strategic plan is that it helps identify and build your competitive position.

Second, it is a helpful approach to thinking about farm growth. If you have a strategic plan, it is easier to determine whether a specific opportunity fits your operation.

Third, it prioritizes your financial resources. Working capital and a strong solvency position can be used for many things. A strategic plan helps prioritize the use of liquidity and unused debt capacity. For example, suppose one partner wants to trade for a newer combine and you have debt capacity available. Does upgrading a combine now fit with your strategic plan?

Fourth, it communicates your strategy to current and potential employees. This is very important for businesses with numerous employees. They deserve to know where the business is headed.

About the Author(s)

Michael Langemeier

Michael Langemeier is a Purdue University Extension agricultural economist and associate director of the Purdue Center for Commercial Agriculture.

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