Uncategorized – Growing Farm Profits | Improving Farm Business Performance™ https://www.growingfarmprofits.com Kim Gerencser - Improving Farm Business Performance in Saskatchewan and Western Canada. Wed, 21 Nov 2018 20:52:21 +0000 en-US hourly 1 https://wordpress.org/?v=4.4.30 #191 – Get on Down the Road https://www.growingfarmprofits.com/191-get-on-down-the-road/ https://www.growingfarmprofits.com/191-get-on-down-the-road/#respond Tue, 28 Aug 2018 07:30:36 +0000 http://www.growingfarmprofits.com/?p=1509 It’s been 191 consecutive Tuesdays. Didn’t miss a single one, not even when I was sicker than I’d been in over 20 years having found myself in emergency 2 days earlier, this weekly commentary on matters germane to small business, family business, your business, was written and shared with you.

When my advisor instructed me to write, weekly at a minimum, I eagerly said, “Okay!” even though it sounded terrifying. And it was, at first, but it then became my medium for much of the stuff that had been ruminating around in my head over the years to have someplace to go. It wasn’t a chore on the “To Do” list; it was simply part of the routine.

But now it’s time to get on down the road. I’ve been hired to take on a project that will keep me from maintaining this weekly commentary, and while I will miss this piece of what has become my weekly routine, my change in direction is what I need right now.

So while this may be the last new piece of commentary produced by me, there are 190 others archived for your perusal at your leisure.

Thanks for subscribing.
Thanks for reading.
Thanks for commenting.
Thanks for sharing.
Thanks for making 191 articles feel like a piece of cake.

Time to Get On Down The Road

 

]]>
https://www.growingfarmprofits.com/191-get-on-down-the-road/feed/ 0
Facets of Growth https://www.growingfarmprofits.com/facets-of-growth/ https://www.growingfarmprofits.com/facets-of-growth/#respond Tue, 24 Apr 2018 07:30:02 +0000 http://www.growingfarmprofits.com/?p=1386 It’s been said that we should think of our business like a tree…
“What is a tree always doing?”
“Growing.”
“If it’s not growing, what is it doing?”
“Dying…”

The analogy ends there. A tree can only grow one way: bigger. Our business must grow many ways.

“Better is better before bigger is better.”

-Danny Klinefelter, Professor and Extension Economist, Texas A&M University

Over my nearly 15 years as a lender and business adviser, I have seen dozens of examples of businesses that grew in only one way. These businesses are not industry specific, they are quite agnostic actually. From construction to farming, from trucking to consulting, many businesses drive themselves straight into the arms of failure simply because they overlooked getting better before they rushed out to get bigger.

Facets of Growth 1The graphic represents a snippet of the numerous facets that drive growth. All have a significant effect on the success of growth aspirations. This graphic is certainly not exhaustive; we are merely dipping our toes in the water. However, each spoke in that wheel has numerous sub-topics, and like a diamond, the many facets have varying purposes, importance, and brilliance.

RE: Customers – How can you grow your customer base? What do your customer like about you? What do they dislike? How do customers find you? How do you find them?

RE: Product/Service – What is your product or service? Is demand growing or shrinking? Which is your link in the value chain (IE. do you manufacture the raw product or do you retail to the final user, or somewhere in between?)

RE: Finance/Cash Flow – Are you financially strong enough to support and sustain the growth you desire? Will the growth you desire help or hinder your cash flow? Can you access the financing you need?

RE: Human Capital – Have you built a team of highly valuable people who drive results in your business? Will your business operate just fine in your absence? Do you people have the ability and desire for more responsibility?

RE: Information Management – Do you have systems in place to provide you with current and accurate information readily available anytime, specific to working capital, accounts receivable & payable, inventory, days to cash, etc?

RE: Management Capacity – Do you, as the manager, have the capacity to literally handle the growth you desire? What skills do you have that are better used in another part of the business? What skills are you lacking in your current role?

Seventeen questions related to six facets of growth; if you were to answer them with brutal honesty, is there room to improve on any of them? Is there opportunity “to grow”? If it is true that better is better before bigger is better (HINT: it IS true) then we’ve just provided you with six major factors in your business where growth can occur. There are more, but if you’ve looked after these first 6, the results will amaze you.

Plan for Prosperity

Growth is not a result or a destination.
It is a process.
It is a mindset.
It is a culture.
It is complex.
It is difficult.
It is worth it.

]]>
https://www.growingfarmprofits.com/facets-of-growth/feed/ 0
Fail to Plan, Plan to Fail https://www.growingfarmprofits.com/fail-to-plan-plan-to-fail/ https://www.growingfarmprofits.com/fail-to-plan-plan-to-fail/#respond Tue, 13 Jun 2017 07:30:49 +0000 http://www.growingfarmprofits.com/?p=1060 Fred* wants to expand his farm. He feels he’s getting left behind when he hears about each land acquisition made by some of his neighbors. It’s not like Fred hasn’t expanded his acres; he’s doubled up since 2005 when he farmed about 3,000. But he knows he can handle more. And by all accounts he needs to increase his acres to spread out his equipment costs; at least that what he hears at all the seminars and reads in all the farm publications. His banker keeps telling him that his costs are too high as well, but she wouldn’t give him a combine loan a couple years ago and the dealer’s financing program did, so what does she know…?

Drawing up plans to seed just over 6,000 acres this spring, Fred can’t let go of the notion that he needs to be at 10,000 acres. There are a couple of neighbors who’ve hinted that they might not put a crop in this spring, and if Fred could take on both, he’d be at 10,000 acres. That would feel pretty good driving through town letting everyone know he was now a 10,000 acre guy! Heck, he might even put it on the side of his truck like some companies do with their safety awards. They’re proud of their accomplishments and show them off, why not Fred?

As he goes over his crop plan, he starts wondering about where he’ll procure his inputs. If he maxes out the lines of credit at both input dealers in town, and the one at the bank, he’ll be able to get everything seeded, fertilized, and sprayed. “No problem,” Fred thinks to himself. He gets on the phone to get prices from each input supplier so he can decide what to buy from whom.

About a week into April, Fred gets the word he was hoping to hear: both neighbors who were considering retiring will not be seeding a crop this year and will be renting out their land. Fred immediately gets in the truck to pay his neighbors a visit to see if he can secure a rental agreement with each of them. To establish good-will and earn the opportunity, Fred offers each $5 per acre cash rent above what they were asking. They shake hands, and Fred excitedly heads home.

Upon sharing the news with his hired help, Fred is too excited about his “accomplishment” to recognize that his lead hand is not happy about what Fred is telling him: the seeding rig will have to run 24 hours since there isn’t time to buy another air-drill and get it field ready. Fred heads back to the house to update his crop plan and to secure more crop inputs.

Two days later, Fred’s world comes crashing down:

  • he is unable to get any more credit to acquire crop inputs for his additional rented land;
  • he has been denied a new cash advance because he was late paying back the old one;
  • he has lost his new rented land because he can’t get inputs and because the cheque he wrote to each landlord for upfront rent payment has bounced;
  • his lead hand just quit to go work for a neighbor who provides a “better work environment.”

To Plan for Prosperity

They key is in the heading title: PLAN

Fred doesn’t plan; he reacts. He is not able to expand his farm even though he thinks he is. He is not as financially strong as he thinks he is because he cannot get more credit when he needs it. He is now short on help to get seeded on his own current acres. Fred wants to be bigger, but he’s overlooked being better.

At risk of “over-flogging” this issue, Fred’s challenge has been lack of working capital. And it is that lack of working capital that has not only directly cost him an expansion opportunity, but indirectly cost him his lead hand.

It’s been said that “if you fail to plan, you’re actually planning to fail.” Fred has become the embodiment of those words. The ramifications of this story go farther than we have time to discuss.

You can avoid falling in with the likes of Fred by enacting control over your future: implement strategic growth using sufficient resources with discipline.


*Fred is a fictional character. The story portrayed above is fictional. Any similarity to a real person or situation is purely coincidental.

 

]]>
https://www.growingfarmprofits.com/fail-to-plan-plan-to-fail/feed/ 0
Critical State – Timing https://www.growingfarmprofits.com/critical-state-timing/ https://www.growingfarmprofits.com/critical-state-timing/#respond Tue, 27 Sep 2016 07:30:59 +0000 http://www.growingfarmprofits.com/?p=625 Bad timing. It takes a lot of blame when decisions don’t turn out. Not hitting the right time to apply fungicide is a great example. Not pricing grain at the right time is another. However, Mother Nature has shown her lack of timing in providing good growing and harvest conditions, but that is not in our control.

The two examples above are within our control. It is possible to watch crop development like a hawk to ensure we hit the optimum timing for fungicide application. It is well within our realm to know what is the optimum price to sell and then utilize derivatives of forward contracts to ensure we aren’t selling on emotion…or greed.

As was described when we first opened the discussion on Critical State, trying to time the commodity markets is like trying to pick winning lottery numbers. Expecting yourself, or your marketing advisor, to be able to “hit the highs” is unrealistic. While it may happen on occasion, if the cash flow projection only works when production is priced at the top of the market, it’s not a sustainable business tactic. It helps to first understand where a profitable price point is. To do this, one must know Unit Cost of Production.

Earlier this year, I was part of a meeting with a new client where we were dissecting their Unit Cost of Production (UnitCOP.) It was amazing, and rewarding, as the crop plan was being changed during our interaction right then and there because of the new level of awareness that UnitCOP brought. Another client reviewed my feedback on his UnitCOP projection for 2016, which wasn’t especially positive based on his expected yields and market price outlook, and yet after a long pause to let it all sink in, his response was “OK, I guess it’s up to me to make sure I grow all those bushels, or more if possible.”

Indeed.

As was described when we first opened the discussion on Critical State, there is also a right and a wrong time to make asset acquisitions, and/or take on more debt. Granted, credit is still cheap and easy; that doesn’t make it the right decision. Discount pricing or other incentives might be extremely inviting (that is the point) but it does not make it the right decision. The right decision will increase profitability, efficiency, and/or cash flow. It’s easy to tell when it is the wrong decision: either profitability or cash flow decrease; it is worse when it’s both. Call it the criteria that differentiates good debt from bad debt.

Even if it is good debt, the timing could still weigh heavily. If equity is tight, and the future outlook for profitability is slim, the timing could lead to Critical State. Think of it like a comedy routine: the best jokes that are sure to bring hilarity can be a bust if the timing is wrong.

Direct Questions

What process do you use to determine if the timing is right to make a specific decision?

For highly detailed people, there is always a reason that the timing is never right. How do you demonstrate that the decision should, or should not, be made?

What is your threshold for determining that the changes to profitability, efficiency, and cash flow have to be met before making the decision?

From the Home Quarter

Bad timing takes the blame for many decisions. But all it takes is solid planning, clear goals, and discipline to render “bad timing” to be nothing more than an excuse.

]]>
https://www.growingfarmprofits.com/critical-state-timing/feed/ 0