Goal setting is an important component of the strategic planning process because goals provide a reference point when making decisions and measuring progress. Family businesses typically set both personal and business goals. 

Personal goals are often related to financial security; family goals, such as statements related to education and leisure time; and values or core beliefs. Once personal goals are identified, they should be shared with others in the farm business. If goals differ among individuals, which they likely will, it is important to have a family discussion so that a consensus can be reached. In most family-owned businesses, personal goals provide the foundation for business goals.

Discuss business goals

Business goals vary widely among farms. For example, surveys have identified the following common farm goals: survive as a business, maximize profits, maintain or increase standard of living, accumulate assets and net worth, reduce debt, avoid or mitigate low-income years, pass the farm on to the next generation, increase leisure or free time, and improve soil health. 

It is very rare for a farm to have a single goal. However, some goals may be more important than others. For instance, passing the farm on to the next generation may have precedence. A hierarchy of goals also is important because goals may conflict with one another.

Rather than focusing on a single goal, sometimes it is useful to think about tradeoffs between goals. For instance, an individual farm may have goals related to increasing net worth, risk mitigation and soil health. It will be next to impossible to optimize these three goals simultaneously. Rather than optimizing each goal, think about a level for each of these goals that would be satisfactory.

Make SMART goals

When developing business goals, it is often useful to remember the “SMART” acronym. Goals should be specific, measurable, attainable, realistic and timely. So, if a farm is developing a goal related to the operating profit margin ratio, it would want to make sure that a specific and attainable value was included in the goal statement. For instance, a goal could be to have a 10-year average operating profit margin ratio of 20% or higher.

We recommend that farms include at least one goal related to financial performance and at least one goal related to farm growth in their list of goals. The only way you can tell whether your farm has a competitive advantage is to track these two items over time. If either one of these metrics is average to below average, a farm should rethink its strategic position.    

Following goal creating is internal scanning, which is an assessment of a farm’s resources and capabilities. Internal scanning also involves thinking about a farm’s strengths and weaknesses.