December 1, 2016

Northwest FCS News

Yes, it is true that the current economic state of agriculture is challenging. However, that does not mean that the plight of the individual farm must also be bleak. Much like we control our own happiness, each farm business always has a choice. In previous columns, we have discussed various economic forces, both domestic and international, that impact agricultural profitability and sustainability. At the micro level, each farm manager determines, at least in part, the destiny of that business.

Regardless of where your business may be on the scale of profitability, your profit potential is directly correlated to your ability to implement four elements of management: plan, strategize, execute and monitor. The first element is to allocate time to plan for the business. Next, you must critically think about and focus on strategy, both short-run and long-run. Third, execute the plan. This may be the hardest step, but in reality, it is where all your hard works pays off. Last, set aside time to monitor the results. Ideally, a quarterly review is best, but even every 6 or 12 months can be extremely helpful in making adjustments and tweaks for the future. Managers who devote time to each of these four steps can distinguish their businesses from the economic cycle.

Factors – such as increased volatility in prices and cost and ever-changing global and domestic marketplaces – can make business planning seem overly challenging. These variables require managers to know the business’ cost of production. In fact, the planning process cannot be completed without this crucial information. More complex businesses with multiple enterprises will also need to know the basic cost of production of each enterprise, which includes specific fixed and variable costs. This critical financial information allows one to capitalize on strategy and opportunity by making needed adjustments. Additionally, this type of management minimizes the detours and avoids the pitfalls in which profits often disappear.

The first step in strategy is to incorporate the business, family and personal goals. With the goals, strategy is simply prioritizing the priorities. In other words, a good strategy allocates capital and resources in alignment with market opportunities and the vision of the business.

The differentiator between your business’ economics and those of the industry is your ability to execute a well-formulated plan. This step often rests with the manager and his or her ability to focus on the job to be done, regardless of distractions. Nevertheless, as the manager and boss, your goal is to develop a plan that the entire business team can execute. It is tempting to allow emotions to enter into business decisions, and sometimes this an area where an outside professional or third-party advisor can be helpful. Objective advisors can help you trust the planning and strategies phases and realize your planned profit at execution.

Finally, a successful business requires a study of results, or monitoring. To use a sports analogy, this management step is much like reviewing game film. Often the team consultants, perhaps older players, are brought in to critique and offer suggestions. Actually, it can be quite rewarding to see the progress and realize the benefits that discipline and time yielded. In addition, identifying problems and solutions promotes a positive perspective for the future.

In conclusion, the management steps of planning, strategizing, executing and monitoring are basics that should be detailed to best meet the needs of your operation. Consider which part of the process will be most helpful for your current situation and what elements may need to go into each step. Even with suppressed economic conditions, the steps of good management allow you, not the industry or the markets, to make the choices that determine profitability. Take control of the factors you can and welcome future opportunity. To further guide your management, remember to use your resources at