After more than a decade of working with farms, livestock operations and other agribusinesses, I’ve found that the most successful entities aren’t determined by geography, operation size or crop type. What sets top performers apart are these traits:
1. They control their expenses. They’ve found that lowering costs is critical to profitability. They may prepay inputs for a discount, look for cheaper supplies or find ways to cut utility costs. They may postpone equipment purchases by focusing on better maintenance. They liquidate non-productive assets. All those savings add up.
2. They set goals and follow budgets. Successful producers have a clear vision of what they want to achieve. Whether it’s increasing production or herd size, or changing their crop mix, they understand how decisions will impact their financial performance. They look ahead a year or more. Most write down those goals and include the numbers. They also set a budget based on accurate prices, yields and costand they stick to it.
3. They use benchmarks. By gathering information and comparing their practices and performances to others inor outheir industry, they learn where and how to improve. They’ve searched planning, planting, buying inputs, irrigating, harvesting and transportation. Benchmarking helps them identify strengths and weaknesses. Those insights lead them to greater success.
4. They understand the market and marketing. The most successful ag operators have taken the time to educate themselves on market terms and drivers. They’re aware of what buyers want. They know their cost of production and understand marketing windows. Savvy producers pay attention to what agricultural economists are saying and apply their projections to their own operations. All that knowledge helps them avoid costly mistakes, mitigate risk and drive revenue growth.
5. They focus on the details. We all know that the devil is in the details. In farming, little leaks here and there add up to large rivers. The producers who consistently succeed have kept track of the money that flows in and out of their business every month. They know what they’re spending and what they’re earning. They track all receipts, records and other financial information. They know what’s going on in their operations.
6. They’re open to improvement and innovation. Top producers are receptive to new ideas and collaborations. They’re always striving for what’s next, for what process can be improved. They may not be the first adapters of new technology, but they’re often among the early users. They’ve learned to incorporate computers, precision farming and information technology into their businesses. They’ve considered new revenue streams, whether from expanding acreage, diversifying into cheese making or investing in renewable energy for their operation. And they understand the importance of leveraging their labor force. That means not only hiring or contracting with the best people, but following through with good training and retention programs.
7. They specialize in a specific area or crop. Many successful farmers focus on a single commodity. That allows them more control over their inputs and provides more familiarity with all that goes into its production. By concentrating on a single crop, they can become very efficient and reliable. They also face fewer distractions. Those same benefits work if they choose work within a particular farm niche, whether it’s organic production, selling direct to consumers or a growing a specific variety.
Any one of these actions could benefit your farm or ag business. If you’re looking to improve your performance, make 2021 the year you put one or two of them into play.
Editor’s note: Maxson Irsik, a certified public accountant, advises owners of professionally managed agribusinesses and family-owned ranches on ways to achieve their goals. Whether an owner’s goal is to expand and grow the business, discover and leverage core competencies, or protect the current owners’ legacy through careful structuring and estate planning, Max applies his experience working on and running his own family’s farm to find innovative ways to make it a reality. Contact him at email@example.com.