I know every year y’all see multiple pieces about expense management. Of course, you likely feel the topic has been overdone, but I am here today to talk about a different aspect of it – realistic goal setting.
I am not the one to tell you how much inputs can be cut without impacting the viability of the crop. However, I can tell you where to look, and the importance of being realistic about your expense cuts.
Over the years I have had farmer-clients present me with projections that showed them cutting their budget by 30% from prior years. They did all the legwork to go line item by line item to cut each category, and researched how much they could cut on certain inputs.
Am I about to say they shouldn’t even try to reach this goal? Absolutely not. What I am saying is, maybe they should set a lower goal – one that has a more realistic chance of achieving -- and move up from there.
What happens when you set an annual goal and you realize early in the year that you won’t be able to reach it? Too often all efforts to maintain spending discipline gets thrown out the window. “I want to lose 15 pounds in two months.” Then you weigh yourself three weeks later and you’ve only lost two pounds. A lot of folks give up at this point.
Just think what happens if they set an attainable goal, though.
“I want to lose two pounds per month for the next three months.” Then at three weeks they would have been pleasantly surprised they were ahead of schedule and would be excited to keep moving forward.
It is the same thought process on expense cuts and goals for farm budgets. Start with small cuts. Wouldn’t you rather be pleasantly surprised rather than disappointed? I know I would.
The right thing for your operation might be to identify line items you want to cut and set attainable goals for each – let’s say 5% for rent or 10% repairs. Then when you look at your budget and see you are on track to reach those goals, you will be proud of your results and excited to move forward to see what other small goals you can achieve.
It is fine to have large goals, but you need the proper expectations to go with those goals, so you don’t throw your plan out the window when you see you won’t reach your goal.
Under-promise on your goals and plan to over-deliver big time!
The opinions of the author are not necessarily those of Farm Futures or Farm Progress.