At a recent conference, I heard a producer say, “Big and sloppy just isn’t going to cut it.” This individual was involved in a large farm business experiencing financial issues. The reasoning behind his blunt assessment is that while once a good thing, a larger operation now has super-sized problems. During the great economic super cycle, many farmers and ranchers expanded in size. As a result of record commodity prices, the increased size of business often resulted in increased record profits without much extra sweat. Now, the size of the business is working against many farms as they continue to sustain substantial losses.

Over the next few years in agriculture, those businesses that drive toward efficiency and “sweat the small stuff” will be most successful. Specifically, keep a few variables on top of your priority list to avoid sloppy management.

First, develop a good monitoring system. Whether it is production cost or marketing and risk management, close examination of results will prove critical to sustainability through the reset. My good friend and fellow professor, Dr. Danny Klinefelter of Texas A&M, often says that the most successful businesses are those that perform just 5 percent better than average in many aspects of their business. In other words, success is at the margin; to use an old economic term, marginal revenue has to be greater than marginal cost.

In a recent survey, 400 producers used individual clicker-response technology to allow for anonymous results. In this survey, over 50 percent of the 400 indicated that they would be growing their business in the next three to five years. If this plan sounds familiar, think in systems and ask questions. Consider how the business growth will impact your need for land and water resources, your marketing plan, or in some cases your backup markets. Examine both short-term and longer-term financial implications of increased debt or reduced liquidity used for growth. What macroeconomic changes will be made and how will they impact the bottom line? Is additional human capital needed, and if so, in what areas of the business? Often, when businesses grow they neglect to grow the talent base of employees and management needed for sustainable success. This, of course, results in “big and sloppy.”

If you are involved in a sizable operation or are planning for growth, think through not only the financial and physical needs for the business, but how to expand your business acumen to avoid the “big and sloppy” syndrome. Driving toward efficiency, monitoring each area of your business closely and planning for business growth carefully are some ways to make sure size does not swamp your margins.