May 17, 2016
Sleepless in the Countryside
Michael Stolp, VP and Senior Business Advisor-BMC
What keeps you up at night when you think about your business? We posed this question to more than 650 producers throughout the Northwest at recent Ag Outlook events in Idaho, Montana, Oregon and Washington. If you’ve ever lost sleep over business transition, government regulation, rising input prices and/or labor, you’re in good company.
Business Transition to the Next Generation
Nearly every farmer program and publication today includes something about succession planning. Whether it’s how to transfer assets or know-how, there’s a reason everyone’s talking about the best practices and pitfalls of family business succession – one out of five producers said business transition to the next generation keeps them up at night.
Whether or not you’re losing sleep, management succession and leadership transition should be one of your priorities if you have or plan to have the next generation involved in your business. As you work with your family, we suggest emphasizing:
- Communication: How do you connect with your team and confirm understanding and foster healthy relationships?
- Strategic planning: Where are you headed and what are your strategies to get there?
- Succession planning: How are you transferring leadership and management know-how to the next generation?
- Asset transition: Do you have an estate plan, including the basics, namely a will, health care directive and power of attorney?
Government Regulation, Taxes and Policy
Government ties business transition as an equally disturbing topic to a sound night’s sleep. It’s easy to understand why, especially in an election year. Policy pain points are answered with proposals from every perspective. Regulatory pressure, rising taxes and policies affect nearly every facet of your business. They’re important to understand and frequently costly to manage. If you find yourself questioning perplexing policy, consider:
- Learning more: Understand your industry’s challenges and potential solutions.
- Being strategic: When building or updating your strategic plan, include a discussion regarding government regulation, taxes and policy, and their current and potential future impact to your business.
- Plugging-in: Beyond strategies for mitigating these challenges, your next steps may include advocacy through industry trade groups and/or the local, state or federal government. Michelle Payn-Knoper’s advice for championing agriculture at www.causematters.com is one of many resources.
Rising Input Prices
Every time commodity prices fall, it seems input prices fall slower. Or worse yet, they sometimes increase! This challenge leaves more than one of 10 producers sleepless. We all know it – volatility is part of your reality and here to stay. However, you’re not powerless when it comes to managing rising input prices and your bottom line when you:
- Understand your costs of production and profit margins: Best practices include not only understanding your costs of production, but understanding costs by enterprise. It’s not only how much you spend, it’s how much you make. Are you investing in the right crops?
- Build and communicate budgets: When costs are higher, there’s usually less profit to go around. Once you understand your margins, review needs and wants with your team. Equipment updates or facility improvements may be nice, but not necessary.
- Negotiate: Someone once said a rut is a coffin with the ends kicked out. Are you in a rut when you consider your input purchasing? Consider second bids to assure you’re getting the right deal – and fit – for your business. The latter is important too; it’s not always about price.
Whether it’s labor for general tasks, technical expertise, management acumen or leadership experience, the challenge is the same: Good employees are hard to find. In fact, they’re so scarce that producers lose just as much sleep thinking about labor as they do thinking about rising input prices. Keys to a better night’s sleep include:
- Attract: Pay isn’t everything. Yes, it’s important. But culture and a professional approach matter, too. How would employees describe your company relative to other farms, ranches and/or agribusinesses in the area?
- Retain: Great employees build a reputation for themselves that competing employers notice. Make sure you keep your employees with competitive pay, vacation/sick time, and a simple incentive system tied to your business’ and employees’ performance.
- Develop: How often do you talk to you employees? No, not just about what they’re doing today, but where they’re headed. Consider incorporating mid-year and end-of-year reviews to reinforce success, identify development areas and confirm opportunities to learn and grow. Educational opportunities span the gamut from QuickBooks and welding courses to attending the next major industry meeting.
Farmers’ and ranchers’ cure for a sleepless night generally includes a hard day’s work the next day. However, hard work doesn’t only happen outside. It’s just as vital in the office, where ‘skull sweat’ (i.e., thinking hard) is equally important. Try one or more of the best management practices above in your business and sleep well!