Amanda Radke: Giving advice on ag success
A few weeks ago, I spoke in Pennsylvania at an agricultural lenders’ conference about strategies for connecting with today’s consumers, and while I was there, I also had the pleasure of listening to David Kohl, Virginia Tech Department of Agriculture & Applied Economics professor emeritus, speak about how to succeed in agriculture in an ever-changing environment.
Kohl offered six tips for agricultural families to work through tight or negative margins. Whether you’re a cattle rancher or a grain farmer, we all go through cycles in the market. To weather the lows, he suggests that producers:
Use an advisory team
“Get a mentor and work closely with individuals who can help make your business more successful,” he said.
Your advisory team might include an ag banker, lawyer, nutritionist, veterinarian, commodity broker, seasoned cattlemen or other mentors who can pass down knowledge gained through experience.
Economic cycle versus management
Isolate the reasons your operation may be struggling right now, Kohl suggested. If it’s a cyclical downturn because of the environment, that’s one thing, but if it’s poor management decisions, “That’s a much bigger problem,” he said.
Whether it’s having to buckle down on the family living expenses or you’re working to eliminate some debt, Kohl said it’s important to celebrate mini-victories because financial management is often very emotional for people. Sure, it’s responsible to cut back on things, but it can be difficult to reason through the emotions of axing movie nights, ditching the summer vacation plans or driving the old car for a few more years instead of buying. Be aware of the emotional toll these sacrifices can be on your family and get everyone involved in tackling debt to keep every family members’ focus on the target goal.
Get your spouse involved
The biggest mistake producers can make, Kohl said, is keeping their spouses in the dark about the goals of the business and the finances.
Communication is key in marriage, friendships, business and life, so don’t neglect talking to your business partner or spouse when making decisions about the operation.
“It’s a team effort,” he said. “Don’t forget to include your spouse in the decision-making process.”
Know how you spend both your time and money and document everything with a paper trail, he suggested. Ignorance is not bliss when it comes to the success or failure of your farming or ranching enterprise.
“Know where you’ve overspent on your budget and make changes before these decisions burn the farm down,” he advised.
Have a business plan
It’s time for some tough love and to ask the hard questions. Is your business sustainable? Does it have what it takes to pass it onto the next generation?
“Prioritize your goals for the operation and ask yourself if your ranch model sets you up to be around in 10-15 years,” Kohl said. “Be honest with yourself and make changes to your business plan if necessary.”
What else would you add to Kohl’s list? Do you have a strategy to weather these volatile times in the agricultural business? Share your strategies with me by emailing me at firstname.lastname@example.org. ❖