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Finance First: A better job planning aheadFinance First: A better job planning ahead

Planning forces us to face the future, while we still have power to make changes.

Darren Frye

November 7, 2017

2 Min Read
Wavebreakmedia Ltd/ThinkstockPhotos

I want to do a better job of planning ahead for my farm business. How should I get ready for 2018? — L.B., Iowa

Keep this in mind: Farm business planning is a process, not an event. Planning could have begun for the 2018 crop year as soon as this summer or fall.

Planning looks at what the future might be like before it happens. That allows you to begin making and evaluating decisions.

When we don’t plan, we just do what we’ve always done. But then we might get into the year itself and wish we had done some things differently. Planning forces us to face the future, while we still have power to make changes.

Think about aspects such as: What will my cash flow potentially be like? What’s my profitability projected to be? What are my breakevens based on my expenses? Use as many “knowns” as you can, plus estimates that are as accurate as possible.

With that information, you can start asking: What changes can I begin making now to improve my situation? What future decisions must I prepare for?

That allows you to be more ready if a new land opportunity comes up, or if a landlord says they want to raise the rent. You’re more prepared to take action, because you’ve already thought it through. Or maybe you find that your input costs are simply out of line. You then have the chance — before you’ve spent anything — to make different decisions.

One of the major behaviors bankers are looking for is whether farmers are taking their business seriously — and bringing them a business plan for the upcoming year is certainly a way to demonstrate that.

Many farmers also like to get added insight from third-party perspectives as they engage in planning — whether from a financial adviser or other farm business adviser. Because of their outside perspective and experience working with other farms, advisers may ask different questions, which can often help make plans more robust.

Frye is president and CEO of Water Street Solutions. Read his blog, Finance First, at FarmFutures.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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