No one that runs a business likes uncertainty and challenges but we should all be looking at our respective farm business models to ensure we are ready for the challenges that lie ahead and importantly that we are ready to take the opportunities which may present themselves. The best way to do this is have a strategic plan in place for your farm business.
The importance of a detailed examination of the financial performance of your farm business to determine your position.
Business Management skills are as important as technical skills for today’s farm. The process of farm business management should start by asking the following questions;
1. Where am I now?
2. Where do I want to go?
3. How will I get there?
4. How will I know if I am getting there?
There are three steps in establishing “Where am I now?”
1. Recording physical and financial information such as farm records and accounts;
3. Interpreting the information.
Step 1: Recording the physical and financial information on your farm
The main reason for keeping records and accounts should be to determine how efficiently the farm is operated and to pinpoint how it can be improved in the future.
The financial information is contained in a set of farm tax accounts or farm management accounts. The production information can be obtained from your Basic Payment Scheme application form, milk statements, grass measuring tools herd register.
Step 2: Analysing farm records and accounts
The first step in analysing your farm business is to fill in a Trading, Profit & Loss. All of this information is contained in your farm tax accounts or farm management accounts.
In terms of making use of these figures, they can be used to work out some financial and production measures of performance.
Step 3: Interpreting farm records and accounts
Once all the figures have been collated, margins can be compared to standards from other farms so that you can see where you stand in relation to others in the industry.
2) Planning for the Future
The Importance of forward planning and goal setting.
This tip addresses the question of “Where do I want to go?” The importance of setting goals cannot be emphasised enough. Without setting goals, you may become dissatisfied with where the farm business is going.
Goals change with circumstances and over time must be re-evaluated and updated on a regular basis.
There are five steps involved in the goal setting process;
Step 1: Intensions
This involves listing the things that you intend to reach or achieve on a personal, family and business level.
Step 2: Long-term goals
Long term goals relate to what you want to accomplish in five or more years.
Step 3: Short-term goals
Some goals you have listed can be achieved in two years or less.
Step 4: Prioritising goals
Establishing one or two long-term goals, then four or more short-term goals at the personal, family and farm business level is usually sufficient.
Step 5: Developing a farm business management plan
The final step in the goal setting process is to include prioritised goals on a management plan for the farm business.
Planning for the future starts from where you are at today. Establishing that is the first step. When you are making an investment on your farm or if you are taking on debt for a period of 10-15 years, you need to have worked out why you are doing it in order to determine whether or not it will benefit your business.