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What’s your definition of farm success?

Finance First: Get a broader view by measuring factors beyond financial metrics.

Darren Frye, CEO

May 20, 2024

3 Min Read
Dollar bill emerging in corn field
Getty Images/JJ Gouin

When you think about a successful farm operation, what comes to mind? Maybe the operation itself looks a certain way. Maybe it’s doing extremely financially well as a business. Maybe the people on the farm are working very hard to progress toward certain goals that are part of a larger, long-term plan for the operation.

It might seem obvious that financial success is part of what creates a successful farm operation. After all, the farm is a business – and without financial success, a business will cease to exist. Farm financial topics are often highlighted in my blog because financial success must be in the definition of a successful farm.

Multiple measures

Is financial success the only measure of success that makes sense or is even worth measuring on the farm? Many farmers would likely instinctively say no.

The financial metrics of the farm are lagging indicators – metrics that tell leaders something about what’s already happened, and the results of the decisions the leaders have already made. But they don’t tell leaders very much to help plan for the future.

Because of that, it can be helpful for farm leaders to have other sources of information and feedback about what’s going on in the farm in real-time. On the farm, a single economic cycle equals the length of a full crop year. Many farmers find it challenging to get meaningful insights in greater frequency.

That’s why having multiple areas to measure the farm’s success can be very helpful. The farm’s financial metrics are still always going to be a good compass to find out how the farm has been doing recently, but there are other areas that farm leaders can look at more often to help the operation improve continually with an eye to the future.

Define it out

The first step to take is to create a definition of farm success for your operation. Every operation has unique factors at play, as I discussed last week. You can use everything that you know about the uniqueness of your operation to create a specific definition for your operation of exactly what farm success means to you and your leadership team.

Try to get as specific as possible in this definition. How will you and other leaders know when that desired success is achieved? What areas will you be looking at to determine that? Remember, it’s not financial success alone, though of course that should be part of your definition.

One way to go to work on this is to have a long-term strategic plan for the farm’s future that includes a breakdown of the strategic goals that are going to move the farm toward how you’ve defined success.

These goals need to include timelines for the completion of each project. One way to assess how things are going on the farm is to look at the progress that’s being made toward those goals. In other words, how much movement toward completion is being made on each goal since the last time it was assessed.

Farmers have found that getting some third-party perspective from our market advisors has helped ease their minds. The advisors help farmer clients with planning and execution around marketing decisions and help keep them up to speed on the current rapidly-changing grain market situation – and how it impacts their operation.

Get a free two-week trial of our marketing information service (MarketView Basic). Your free trial includes regular audio and video updates, technical analysis, recommendations and more. Learn more about our market advisor programs and offerings at www.waterstreetag.com.

About the Author(s)

Darren Frye

CEO, Water Street Solutions

Darren Frye grew up on an innovative, integrated Illinois farm. He began trading commodities in 1982 and started his first business in 1987, specializing in fertilizer distribution and crop consulting. In 1994 he started a consulting business, Water Street Solutions to help Midwest farmers become more successful through financial analysis, crop insurance, marketing consulting and legacy planning. The mission of Finance First is to get you to look at spreadsheets and see opportunity, to see your business for what it can be, and to help you build your agricultural legacy.

Visit Water Street Solutions

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