strategy – 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 Direction https://www.growingfarmprofits.com/direction/ https://www.growingfarmprofits.com/direction/#respond Tue, 21 Aug 2018 07:30:50 +0000 http://www.growingfarmprofits.com/?p=1506 Without direction, how do you know where you’re going? And we’ve acknowledged many times in this weekly commentary, if you don’t know where you’re going how would you know if you’ve gotten there?

Who sets the direction for your business? Without direction and a charted course, your business is akin to a rudderless boat, just floating along aimlessly. While “floating along aimlessly” sounds like a great vacation, it is most definitely not a strategy for your business.

Direction is set by the leadership team within the business. Big or small, any business without solid leadership, visionary decisive leadership, will find it very difficult to achieve its full potential.

This is why great leaders are well known, highly regarded, and abundantly compensated.

This reality crosses into all aspects of life, not just business. Sports, politics, religion, even in households, the same can be said. Every organization, even volunteer advocacy and/or charity groups have a designated leader…someone who sets the direction for the organization, or in the case where there is a board of directors (or something similar) the leader is accountable for the execution of the strategy and direction for the organization.

Nowhere is the accountability of the leader more public than in professional team sports. Anyone who is fan of any team sport can think of a time where their favorite team, or another team in the league, has went through the turmoil of having a talent laden roster of athletes that habitually fails to succeed. Often, all it takes is a change in leadership, the head coach or general manager for example, and the team begins to win. The leadership can also be identified in the locker room among the players; adding a player with tremendous leadership attributes can be as beneficial as cutting a player who brings a toxicity to the locker room. As fans, we all witness these personnel transactions and then complain or celebrate accordingly (depending on our own view of the matter) but it is a test of the team’s leadership to make the decisions to essentially “fire” a coach or player who may be popular from the outside looking in, but is a detriment from the inside looking out.

This example applies to your business as well. While it may be hard to justify letting go of a star member of your team, if that individual is not conducive to team harmony and progress it falls on the leader to make, or not make, the hard decision. Either way, the leader has provided a clear message to the entire team through their (in)action.

What is even harder is when the person that needs to be let go it the leader himself! Are you holding your team back from achieving their full potential? How would you even know if you are? Could you handle hearing that the problem is you, or would pride get in the way? It is a wise and humble leader who recognizes that the best move for the organization might be to fire herself.

Plan for Prosperity

Whether you believe that leaders are born or leaders are made, an organization without a leader is an organization without direction. Without direction, a business lacks purpose. Without purpose, a business lacks the ability to make progress. Without progress, a business becomes redundant. Look no further than Kodak or Blockbuster Video for real life examples.

As the leader of my own business, I hold the accountability for decisions (good or bad,) results (good or bad,) and overall direction & strategy. As the leader, it is up to me to adapt when things change because, as they say, “The only constant is business is ‘change’.”

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Growth Kills https://www.growingfarmprofits.com/growth-kills/ https://www.growingfarmprofits.com/growth-kills/#respond Tue, 24 Jul 2018 07:30:29 +0000 http://www.growingfarmprofits.com/?p=1476 We’ve all heard the anecdote “Speed Kills” as it was used to advise drivers to slow down. Former Canadian Football League (CFL) player Jason Armstead had “speed” and “kills” tattooed on the back of his left and right calf; as one of the fastest players in the league during his playing days, Armstead’s speed as a wide receiver and returner could kill the opposing team’s chances of winning.

But who has ever heard of “Growth Kills”?

I have written about it in this commentary and spoken about it at industry events: business can grow itself to death.

When a business pursues expansion at a pace that exceeds:

  1. Management’s ability to manage the growth,
  2. The business’ ability to finance the growth, or
  3. The market’s ability to consume the growth…

…we have an entity that has likely grown itself to bankruptcy, or the very brink of bankruptcy.

We’ve all seen it. A couple years of back to back successes, and owners feel invincible! The next thing you know, there is new equipment and buildings being added to the operation, fancy vacations being planned, and new personal expenditures (like houses, RV’s, and vehicles) being made like the lotto has just been won. Everyone who sees this opulence must surely believe that this business is very successful.

If owners (managers) are ill-equipped for the rapid success they’ve enjoyed, there is a likelihood that less-than-ideal decisions will be made in the future. As Marshall Goldsmith titled his bestselling bookWhat Got Your Here Won’t Get You There. Management has to keep up with the change that sustainable growth requires. This could include new knowledge/strategy/execution in areas like cash management, human resources, marketing, etc. Growth kills when management’s ability is stagnant in the face of growing complexity in business.

As sales grow, there is a need for more investment in the business (Eg. property/plant/equipment; labor; technology, etc.) to support the demand. That investment requires capital. Whether the capital is borrowed or sourced from within the business (usually taken out of working capital) has a major effect on the sustainability of the investment. Growth kills when, without a “home-run” or two, investment is pursued to the point that financing is maxed out and working capital is depleted.

What happens when more product is produced than the market can consume? A shift is made, and what once may have been a specialty item is now offered at a lower and lower price until supply has been consumed (see the “model year blowout” and virtually every car dealership every year.) A business that has enjoyed significant growth may decide to increase production based on past sales growth. Such a decision usually requires investment in the business (see the previous paragraph) and investment in inventory. Whether that inventory is raw material, or finished product remaining unsold, it is tying up working capital. How long can a business hold inventory before it converts that inventory to cash? If working capital is been reduced (see paragraph above) the answer is: not long.
Maybe the business is in a service industry. While there likely isn’t any inventory to have to manage, ramping up capacity (hiring & training staff, acquiring tools & equipment for staff, etc.) requires investment. These investments also carry an overhead expense (salaries & wages, utilities, depreciation, etc.) which becomes harder to pay for when market uptake is satiated. Growth kills when we assume the market will sustain our rapid growth for us.

Plan for Prosperity

What led to the recent success in business? Was it deliberate, planned, and executed…was it intentional growth? We recently discussed the ramifications of unintentional growth. Maybe this article should be titled (Unintentional) Growth Kills, but that probably would not have captured enough attention for you to even read it.

Growth Kills when the growth was unintentional and leads the ownership/management group to ignore the reality that (almost) all industries are cyclical. To say timing is everything does not give credit to important factors like strategy and execution, however an adequate strategy will give consideration to timing (to implement the growth strategy.)

It’s all connected. There is no magic bullet; one thing alone does not make success, and if it does, it’s “luck” and it’s short term because luck isn’t sustainable.

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The Uncontrollables https://www.growingfarmprofits.com/the-uncontrollables/ https://www.growingfarmprofits.com/the-uncontrollables/#respond Tue, 03 Jul 2018 07:30:05 +0000 http://www.growingfarmprofits.com/?p=1459 There are many factors at play which affect your business each day. (Oh, look…I’m a poet and didn’t even know it.)

How is your business affected by:

  • NAFTA
  • Trade Wars
  • Real Wars
  • Geopolitical strife
  • Interest Rates
  • Income Tax
  • Sales Tax
  • Foreign Exchange
  • Oil Prices
  • Commodity Prices
  • Utility Prices
  • Inflation
  • Deflation
  • Theft and Vandalism
  • Weather and Natural Disasters
  • The 4 D’s (Death, Divorce, Disagreement, Disability)
  • Physical, Emotional, Spiritual, and Mental Health

You have full control over none of these. At best, you might have partial influence over two or three on that list. Yet you, your business, and ultimately your family will all feel an effect that falls somewhere between minimal and profound.

The way to minimize the negative effect of any of The Uncontrollables is to prepare. You wouldn’t head out on a road trip with an empty fuel tank and no spare tire, would you?

A strong balance sheet (meaning low Debt to Equity along with surplus Working Capital) will mitigate the negative effects of The Uncontrollables. Conducting sensitivity analyses on the likes of tariffs, interest rate changes, tax changes, and foreign exchange will provide your business with the critical knowledge needed to make informed decisions in the face of The Uncontrollables.

Plan for Prosperity

We can scream and holler, protest, or pout all we like in the face of The Uncontrollables; it will change nothing.

God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

-Reinhold Niebuhr

Having the wisdom to know the difference between between what you can control and what you can’t is merely the fist step; acknowledgement of what you cannot control on its own will not mitigate the effect of The Uncontrollables. Action will trump intention every time.

Take action to protect your business, your family, your legacy. You need not be a rudderless vessel helplessly surviving on the mercy of the sea. There is no need to be stranded on the side of the road with no fuel, no spare tire, and no phone.

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Cycles https://www.growingfarmprofits.com/cycles-2/ https://www.growingfarmprofits.com/cycles-2/#respond Tue, 19 Jun 2018 07:30:38 +0000 http://www.growingfarmprofits.com/?p=1442 “It’s cyclical.”

This statement applies to so much in our world. From interest rates to fashion trends, from climate to markets, so much of what we see, hear, do, say, and feel is cyclical.

In meeting with commercial bankers recently, here are some of the points I took special note of in the conversation:

  • Many of our clients are struggling through a slow-down right now.
  • Very few applications are for growth. Most are to restructure, especially in preparation for increases to interest rates.
  • So many of our clients do not understand their balance sheet or how it affects their business.

The first bullet above led to a longer portion of the total conversation. The banker who made this statement went on to describe how the boom years we have recently enjoyed led many people (entrepreneurs and employed folks alike) to create some bad habits, such as not preserving cash (working capital) and increasing their debt. When things slowed down and business got tight, the debt payments still need to be made, as does payroll, and utility bills. Somehow, the elevated lifestyle expenditures that cycled up during times of easy prosperity did not cycle back down when profitability and cash flow did.

A similar sentiment was gleaned from an ag banker (who asked to remain nameless while granting me permission to include the response below) serving North West Saskatchewan and North East Alberta. When I asked about what the trend has been in that part of the province for farm land prices and rent rates, the response included the following:

“Profitability and cashflow has been squeezed the past 3 years, due to a combination of the weather anomalies (in most cases, more moisture than needed), increase in production costs, and financing needs (and in some cases may be “wants” vs actual “needs”).  Those producers/files with the stronger balance sheets and working capital positions, have fared better through this, compared to some others.”

For any of you who think that your business (or industry) is the only one to have to manage cycles, please understand that cycles are industry agnostic. The market does not care what you’ve been through, what your plans are, or what your name is. Your business plan needs to include M.O.C. – Management of Cycles.

Long time readers of my commentaries know that I have referenced Moe Russell of Panora, IA on more than one occasion. It was from Moe that I first heard the term M.O.C. – Management of Cycles. Moe tells the story of how he picked it up during a chance conversation in an airport with Matthias Grundler, the then Head of Procurement for Daimler. When asked, Grundler admitted that M.O.C. (management of cycles) was his greatest concern.

What cycle are we headed into right now? If we knew, if anyone truly knew, business would be so much easier! The risk, of course, is that we tend to get caught up in recency bias:

Recency bias occurs when people more prominently recall and emphasize recent events and observations than those in the near or distant past.
By putting more credence into recent successes rather than recognition of impending change, we set ourselves up for what is happening in many small to medium sized businesses right now: financial stress leading to major upheaval in the business.

Plan for Prosperity

Trying to fight against the market cycles (or industry cycles as it may be) is like trying to fight gravity. Like it or not, it will affect you. Cycles have been happening for a lot longer than you’ve been in business, and will continue to occur long after you are gone!

“Bullet proof your balance sheet during the good times, so you can catapult ahead of your competitors during the bad times.
If you get greedy during the good times, you’ll likely be on your knees in the bad times.”

Moe Russell
President, Russell Consulting Group

Look back to the response above from my ag banker colleague; those (businesses) with the stronger balance sheets and working capital…have fared better through this…” The businesses that built a balance sheet to protect them during a down cycle are the businesses that are ready, and as such will take advantage of the opportunities presented by a down cycle. Those opportunities range from additional labor (that may have been laid off from a financially weaker competitor), picking up assets (land, equipment, or buildings) that may have been relinquished during the down cycle (and are likely far cheaper now,) or possibly even buying out a competitor who has been left in a weakened state by the market cycle.

“Market cycles will hurt some, but offer opportunity to others.
The difference between who suffers and who prospers is…Who’s Ready.”

– Kim Gerencser (March 2013)

Which side of that line do you want to be?

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Elasticity https://www.growingfarmprofits.com/elasticity/ https://www.growingfarmprofits.com/elasticity/#respond Tue, 12 Jun 2018 07:30:38 +0000 http://www.growingfarmprofits.com/?p=1437 Elasticity is an economic term that assesses the change in demand of a good or service relative to changes in other factors, such as price, consumer income, or supply. Goods and services are said to be elastic when they are more sensitive to changes in other factors. Examples of elastic products and/or services would be new home construction, extended vacations abroad, and (sadly) savings accounts. Inelastic goods and services have very little change in demand when other factors, such as price, are changing. Examples are gasoline, utilities (natural gas, electricity, water) or an ambulance ride (no one dials 911 for an ambulance, but then shops around for the best price…)

When considering what your business provides, whether it be products or services (or both), what types of elasticity affect the demand for your offerings?

The most common type of elasticity is price. How does a change in the price of your product or service affect demand?
Another type is supply. How does a change in supply affect demand for your product or service?
Another type is customer income. How does change to your customers’ income affect demand for your product or service?

One factor that contributes to elasticity of your product or service is the availability of a substitute product or service. Who are your competitors? What makes you different from them? Are they local? Do they operate online? Etc.

A business that had exclusive distribution rights on a high quality brand name product felt that its business was immune from price elasticity. While not over-charging, they did become complacent in their marketplace because they believed that their competition provided inferior products. When competition arrived in their marketplace which their customers felt was better value (price vs quality), the business suffered.  At this point, they were forced to react to their market’s pressures. Reactive is never as good in business as proactive.
(How many specific examples can you think of that are aptly described by this generic story?)

If you have experience recent changes in the demand for your product or service, one of the many factors to consider is elasticity (customer service and product/service quality are the foremost factors to understand in this realm.) However, this will be very difficult to quantify without sufficient business record keeping and information.

Plan for Prosperity

There are many factors that affect your marketplace and your position in it. This becomes even more complicated in the current age of technology. How are you planning to stay relevant? Or better yet, how are you planning to innovate, to lead the market and not just keep up with it?

Understanding the elasticity of your product or service is an important piece of knowledge that accentuates your ability to position your business in your marketplace. It will give you more power to prepare for how those multiple factors (such as price, supply, and customer income) will affect your business.

Elasticity is not a perfect function, nor is it the only measurement you should employ. There are anomalies: I think it is sad, and a little dangerous, that new electronic devices (like smart phones) and consumer debt appear to be inelastic, yet should be highly elastic.

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Vision https://www.growingfarmprofits.com/vision/ https://www.growingfarmprofits.com/vision/#respond Tue, 22 May 2018 07:30:58 +0000 http://www.growingfarmprofits.com/?p=1421 Where are you looking?

As an entrepreneur, there are numerous issues clamoring for your attention. Which ones get your time and focus?

If your business is a vehicle hurtling down the highway, where are you sitting in the vehicle and where are you looking?

  1. Driver’s Seat
    The now defunct automaker, Pontiac, once used the tag line “Built for Drivers.” Many years ago, a good friend owned a Pontiac Grand Prix. As I got in, and looked for the seat adjustments, I found that there were not many and they were manually controlled; whereas his driver’s seat had full power adjustment and more. As I poked fun at the lack of amenities in his car, he casually fired back, “Built for drivers.”
    The driver’s seat is command central. There is little that cannot be controlled from the driver’s seat, and practically nothing can be controlled elsewhere which is not controllable from the driver’s seat. The control is centered here.
    In your business, the metaphor of the driver’s seat is not just a seat for one (I am sure you do not want a culture of autocracy in your business). With whom are you sharing control? Do you all have the same goal for where the business is going, or are you all tugging at the wheel trying to change direction, arguing over heat versus air conditioning, or fiddling with the radio?
    Maybe you are sitting in the passenger seat, providing navigation assistance and influencing the decisions of those in the driver’s seat? Just be aware that if you are in the passenger seat, it takes a more concerted effort to see what the driver sees. Read on…
  2. Dashboard
    Truck DashbaordThe more comprehensive the dashboard, the better. Personally, I am highly frustrated at vehicle dashboards that have only three gauges and a plethora of warning lights. By the time any of those warning lights appear, it’s too late, the damage has been done. Whereas a a dashboard full of gauges allows me to monitor all the critical functions of my vehicle (my business.) My ideal dashboard looks more like this photo.
    Are you looking at your dashboard? Is your dashboard full of gauges or warning lights? If you have ignored the gauges, you will still get a warning light (and possibly an alarm) indicating your working capital is depleted, your staff is unproductive (maybe even leaving your employ), or your overhead has gotten out of control. These alarms could come from your banker, your key managers, or your accountant. But once the alarm has sounded, is it too late? It is much easier to proactively respond to an overheating engine by watching the gauge on the dashboard rather than getting an alarm telling you “it’s too late, now pull over and stop.”
  3. Rear View Mirror
    While most drivers fail to look in their rear view mirror enough, entrepreneurs tend to look there too much. While it is human nature that our past experiences shape our future decisions, it is impossible to move forward if you are only looking back. (Notwithstanding, I continue to be amazed at how many drivers do not look back, even when their vehicle is in reverse!)
    Take a look back regularly. Acknowledge the decisions that created the path left behind. Learn from them. Make better decisions going forward.
  4. Out the Windshield
    New drivers tend to look down the hood of their vehicle at the road immediately in front of them. By doing so, they often fail to recognize a hazard up ahead. This practice can result in severe reaction to avoid a hazard which may put the vehicle out of control which may result to a collision, injury, or worse.
    New entrepreneurs often have the same behavior: they tend to look only at what is immediately in front of them. Like the new driver, this can result in extreme adjustments from a reaction to avoid a hazard whether perceived or real. Does this apply only to new entrepreneurs? Sadly, no.
    By keeping your eyes up and on the road ahead, the driver can identify potential hazards early and adjust strategically. She can scan the landscape to the left and right for wildlife and intersecting traffic. Doing so allows her to be prepared to respond quickly and accurately versus panicked and severely.

Plan for Prosperity

Whether you sit in the driver’s seat or the passenger’s seat, you have the best perspective to see what is ahead. Discuss the observation and decide how to respond. (Vision/Strategy)
There is a reason the rear view mirror is a fraction of the size of the windshield. Use each of them accordingly. (Progress)
Build yourself a dashboard that allows you to quickly and easily monitor the most critical functions at a glance. This dashboard information is only useful if current and accurate. (Monitor & Control)

Where are you looking?

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Sub-Topics of Growth (Part 3) https://www.growingfarmprofits.com/sub-topics-of-growth-part-3/ https://www.growingfarmprofits.com/sub-topics-of-growth-part-3/#respond Tue, 15 May 2018 07:30:55 +0000 http://www.growingfarmprofits.com/?p=1411 In this final installment of our discussion on the multifaceted growth opportunities that exist in your business, we will touch on Information Management and Management Capacity. One more time, here is another look at the graphic that has laid out the basis of our conversation.

Facets of Growth 1 Information Management

This refers to the information that you need to run your business day to day, month to month, year to year, production cycle to production cycle, project start to project end, etc. Whatever the scope and duration required for your specific business is subjective and will be determined by you and the needs of your business. Have you given much thought to the type of information you need, what form you need it in, and how often you need it? Far too many businesses have not given this question sufficient thought.

How does a business make important decisions without sufficient information? Has your lender ever granted you new or additional credit without sufficient information? Of course they haven’t! Doing so increases risk, and banks are exceptional at managing risk.

Depending on your business and the industry in which you operate, the information you deem most critical will be different from others. For example, a business in the service industry may need to track client contacts per employee per day whereas a business in the construction industry may want to track re-work (work that needs to be redone because it wasn’t right the first time.) Critical information that is industry agnostic would include current and accurate information on liquidity, productivity, and profitability.

What systems do you currently use to compile your business information? Remember, systems do what they were designed to do, so if your system is not providing you with the results you want then there is a flaw in your system! Taking a look at the graphic below, your management information system(s) should collect raw data from business operations (whatever business, whatever Information Managementindustry) and produce the data into a useful form, typically a report of your preference, so that management can analyze the results of what has happened in your business over the last period of time (week, month, quarter, etc.) Business decisions get made which affect operations, and those decisions get made anyway, even if out of necessity. So why not make informed decisions that are impactful, progressive, and positive?

If working capital is tight, would it be helpful to learn that your customers take 3 weeks longer to pay that you thought? If profitability is not meeting expectations, would it help to know that profit margins have been shrinking? If productivity is under budget, would it help to know that employee sick days have been on the rise? What you think are problems in your business (tight working capital, shrinking profit margins, decreased productivity) are actually symptoms of the real problem (which in this case could be lengthy accounts receivable, poor inventory control, or lack of staff morale…)

If you are going to step up from trying to treat the symptom by first learning what actually is the problem, then you need good management information.

Management Capacity

Coming from the farm and having spent most of my professional career working in agriculture, I often get asked a specific question by people who grew up on farms in the ’50s or ’60s but have left the farm as young adults and never got involved in farming. They ask, “These farms are getting bigger and bigger; how big is too big?” My response is, “I can tell you exactly when. It’s when the farm has expanded beyond the owner’s/manager’s ability to manage it! For some, that is 40,000 acres; for others, it’s 400 acres.”
**NB: Not looking at corporate city limits but actual development, 40,000 acres is slightly less than the size of Regina, Saskatchewan. In contrast, 400 acres is approximately the area used by the Tor Hill Golf Course.

Management Capacity Business owners/managers (these roles are not synonymous, by the way) must be proficient in many different aspects of their business. One might say that business owners “need to wear many hats.” Being an expert in the work your business does is important, but if that is where your capacity ends, then you surely have “fallen prey to The Fatal Assumption” that Michael Gerber wrote about in The E-Myth Revisited. Just to name a few, strategist, controller, marketer, recruiter, trainer, collector, innovator, and leader are but a smattering of the hats a business owner must wear at some point or another. If your capacity while wearing any of those hats is less than “expert”, then you might be inhibiting growth!

“Do what you do best, and get help for the rest™” is a cornerstone of my advisory work with clients, and as such, I’ve trademarked it. If we spent our entire lives trying to improve on our weaknesses, we would reach the end of our lives with a bunch of strong weaknesses. However, if we spend our lives utilizing our strengths and utilizing the strengths of others in areas we are weak, then we create a synergy that provides incredible leverage not only for our business, but for ourselves and the people we have hired!

Take a moment this week to perform a self-audit on where your capacity is reaching its limit. Growth is about breaking through limitations, and this becomes an exceptional opportunity for growth, both in your person and in your business.

Plan for Prosperity

Growth is about more than just size and scale, but it is about expanding. Growth is expanding our view, our skills, and our attitudes. Growth is about expanding our network, our credibility, and our place in the market.  We’ve just completed a three-part journey that coursed through the many facets of growth. In summary:

  • Your customers give your business a reason for being. How do you find them and keep them?
  • Your product or service can be your boom or bust. Are you innovating how your deliver your product/service? Where is your link in the value chain?
  • Pursuing growth from a position of financial weakness is a recipe for disaster. Are your finances putting in the position for growth, or are they hindering growth opportunities?
  • How are you investing in your people? Are they being trained? Are they provided with increasing responsibility? What type of culture does your business have?
  • Accuracy of your management information is critical. Is your information system up to par? Are you making critical decisions with outdated or inaccurate information?
  • If you are the heart and soul of your business, is your capacity in any of the critical management functions you perform a limiting factor in your business’ growth?

You business is like a tree: if it is not growing, it is dying. But unlike a tree, your business has many ways it can grow. Always grow, and grow all ways.

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Heat and Light https://www.growingfarmprofits.com/heat-and-light/ https://www.growingfarmprofits.com/heat-and-light/#respond Tue, 27 Feb 2018 07:30:24 +0000 http://www.growingfarmprofits.com/?p=1337 Heat comes from energy. Emotion creates energy. Therefore, emotion provides the heat.

But, emotion can also cloud our judgement. It can lead us to act irrationally, and even in ways we would not normally behave.

Light, however, provides perspective. By illuminating more than what is right in front of our nose, we are able to recognize more options than emotion alone would have permitted us to see.

Light is awareness. Awareness allows us to think.

Heat with no light is raw, unbridled, emotionally charged nonsense.

Light with no heat is cold, calculating, and rigid to the point of inaction.

“Logic makes us think, emotion makes us act.”

– Alan Weiss

 

Plan for Prosperity

Like everything in life, too much of anything is not a good thing. Your business needs a balance of heat and light.
You, as the business owner, no doubt, have an abundance of heat. Where do you source your light?
I, as a management adviser, am hired to provide light. That light is awareness to options and strategies that can benefit your business.

But without your heat, no amount of light will make a difference.

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Contrasting Behaviors in Outcomes https://www.growingfarmprofits.com/contrasting-behaviors-in-outcomes/ https://www.growingfarmprofits.com/contrasting-behaviors-in-outcomes/#respond Tue, 13 Feb 2018 07:30:05 +0000 http://www.growingfarmprofits.com/?p=1315 Seth Godin recently wrote a blog titled The Super Bowl is for losers. In it, he describes the reasons why the only winner in Minneapolis’ bid to host Super Bowl LII is not the city or its residents, but the builder of that new $1,129,000,000 stadium. In this particular piece Godin contrasts the decision to pursue grandiose “stadiums” that often lead to a loss versus investing in projects with purpose that would have a less conspicuous result. His description of the human behavior that allows these types of decisions to keep happening is insightful and can be applied to the small-to-medium sized enterprises, the family businesses, that you own and operate.

Below are three of Godin’s version of “valuable lessons about human behavior” (as excerpted from his blog being referenced above) with my insight in how it applies to family business.

  1. The project is now. Investing in long term strategy or knowledge/practice improvement takes time, the results are aren’t always obvious from a quick glance, and usually requires some “not fun” work for the owner/manager. Whereas, that new pickup truck out front or that bigger tractor in the field has immediate impact to our image and our ego. One is tangible (you can see it, smell it, percolate in the feeling you have when driving it) and one is not (no one can see it immediately, or touch it ever…)
  2. The project is specific. We have been conditioned to believe that our businesses must get bigger to survive. This is not absolute. Yes, our businesses (and ourselves) must always grow (and grow all ways) but don’t let yourself get pigeon-holed into the thinking that growth is only “size and scale.”
    Analyzing the opportunity to increase in size is fun (and easy if you limit your parameters) because it’s usually done to justify the desire (IE. we can lower our fixed costs per acre.) Whereas, the work required to analyze the opportunity to “Be Better™” is less intriguing, often subjective, and less sexy. 
  3. The end is in sight. It is easier to sell ourselves on something where we can see the final result. A building, an upgraded fleet, new computers…versus…creating a culture, implementing systems, strategizing cash flow. 

Godin’s final thought: “For me, the biggest takeaway is to realize that in the face of human emotions and energy, a loose-leaf binder from an economist has no chance. If you want to get something done, you can learn a lot (from) the power of the stadium builders. They win a lot.”

To paraphrase, we get caught up in what some people call “shiny object syndrome.” Our decision to chase that which is new and appealing versus what is boring but meaningful is what contributes to results that are less than what they could potentially be.

Plan for Prosperity

As an advisor to business owners and managers, it is my job to draw out the desired results my clients want for their business. While everyone says they want stronger cash flow and improved profitability, behavior often indicates otherwise (Ref. shiny object syndrome.) When actions deviate from what are declared desired outcomes, then we shouldn’t be surprised when actual outcomes deviate from what was desired.

Last week at a presentation I was giving, a woman in the crowd tearfully shared that her farm profitability was not as high as it could be, but the fact that her teenage children could live and work on a farm to develop life skills and work ethic was something she felt was more valuable. This is an example of how different each business owner views success, and will therefore determine what is a desired outcome. Understanding what is most important for you and your family in business is most often discovered when working on…

(wait for it…)

…A PLAN!

 

 

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Don’t Panic https://www.growingfarmprofits.com/dont-panic/ https://www.growingfarmprofits.com/dont-panic/#respond Tue, 06 Feb 2018 16:29:31 +0000 http://www.growingfarmprofits.com/?p=1324 The markets are on a wild ride over the last week. After an elongated bull market, we’ve seen huge drops in the value of the S&P500, which have created ripples in Canada as well as in foreign markets. Right on cue, we hear investment advisors insist that staying the course and not panic selling is the best thing to do. The markets always go up and go down. After every crisis, brighter days returned which left us to quickly forget how we felt during said crisis.

“This, too, shall pass,” I heard an investment advisor say today in the media.

“Markets take the escalator up, but the elevator down,” is what I’ve heard from many commodity market advisors. This also applies to equity markets it would seem.

It must be asked, “Why is the best advice to hold? Why not get out before the market falls any further?”
The answer: because staying in the market is part of your PLAN!

*Anyone getting tired of hearing about planning yet?

If your PLAN is to buy and sell, in other words trying to time the market to maximize return and even “outperform” the market, then you’ll probably have to go it alone because no investment advisor would work with you. CyclesBut your PLAN, when beginning your investment activities, was to create wealth from long term growth. If that wasn’t your plan, you’d need to be a day-trader; I’m going out on a limb here, but if you’re reading this blog, you’re probably not a day trader.

Back to your PLAN: jumping in and out of the market looks more like this graphic, because as weak humans we’re emotional creatures who make dumb decisions when emotion creeps into the equation.

How does this apply to your business? Have you made emotional marketing decisions in the past? Have you tried to time the market? Read through every point on the graphic; tally up how many apply to you (as in, how many of those have you said in your career?)

 

Plan for Prosperity

If you find yourself wandering, unsure of how much you might benefit from planning in your business, consider the metaphorical genius found in the children’s fairy tale Alice in Wonderland.

When Alice asks the Cheshire Cat, “What road do I take?” his reply is, “Where do you want to go?”
When she says “I don’t know,” his apt response is, “Then it really doesn’t matter (which way you go), does it?”

In essence, what the Cheshire Cat is telling Alice is that “if you don’t know where you’re going, any road will take you there.” There are many different people who have been attributed to that specific statement, so I cannot confirm who said it first. But nonetheless, it applies…to life and to business…to your investment strategy and to your business strategy…

Don’t panic, just decide where you want to go.

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