As 2018 reaches full swing, now is the time to evaluate your current situation and provide financial security for your farm and ranch this year. Ag management planning is time well spent and will help your operation thrive into future years. In light of the new year, here are some highlighted tips and resolutions for farmers to consider:
- Stay focused on costs. The first step to a successful start for 2018 is knowing your cost of production. You should have a working budget that is regularly updated as input prices are locked in. When budgeting, remember to evaluate and manage all costs, including family living expenses. In addition to careful budgeting, run multiple budgets under different scenarios. Consider what a worst-case scenario and a best-case scenario could look like.
- Manage working capital. Monitoring working capital is always important but especially during times of tight margins. If your operation experiences negative losses, working capital is used up to keep the operation going. With too little working capital, you will likely find yourself in financial stress. To calculate, use your worst-case budget scenario and see how many years of losses your working capital could cover.
- Invest where necessary. Whether it be a bull for your ranching operation or quality seed and fertilizer for your farming program, spend your money where you will receive high profitability. Plan for investments that will help provide higher return in the long run.
- Identify the best use of your time and resources. Many items consistently fill the farm’s to-do list. It seems like there is a new product, service, or app to help you improve the management of your farm every time you pick up a farm magazine or go to a farm show. While all these tools might be useful and helpful, it’s important to identify the best uses of your time and resources. For some farms, this might be time spent scouting fields. In other cases, it might be putting time into financial planning, working on equipment, or negotiating input prices. It’s important to recognize which activities are best suited for your management given your operation’s needs and your skills. In short, are you spending your time on the things that are likely to have the biggest impact toward meeting your profit and financial goals? Make sure to stay focused on the things that matter the most. When possible, utilize detailed record keeping. This will simplify the planning process for future years.
- Take advantage of new technology. Technology is constantly changing, and a product targeted toward your farm and ranch is always on the horizon. Review newopportunities carefully. Take advantage of those that fill the needs and skillset for your farm and ranch, and pass on those that simply consume time but don’t reflect a positive return.
- Manage Risk. While many hope it doesn’t need to be utilized, it is important to be prepared for life’s unexpected circumstances. This includes purchasing the right crop, property and casual, liability and even life insurance to properly protect you, your family and your operation. Having the proper risk management in place could make or break the survival of a farm and ranch operation in the event of an unforeseen circumstance.
- Plan Succession. It is often hard to start the conversation for farm and ranch families to plan succession, but a properly structured succession plan provides opportunities for continued business with current generation of owners and managers and also establishes working relationships for the next generation. When planning be sure to include a power of attorney and consider implementing living wills and health care directives.