“The success of any farm enterprise, regardless of size, geography, or commodity is directly related to the farm business management skills and practices of the farm manager.”
This is a quote from a session I attended at FarmTech, put on by Farm Management Canada.
Farm Management Canada has gathered some very interesting information in an extensive cross-Canada survey focusing on best farm management practices. Their research looked at the adoption of business management practices across Canada. The results reveal: There’s room to improve.
The chart below shows the key activities and the percentage of producers surveyed who actually do the activity as a part of their farm management.
From that list they highlighted the seven farm business management practices that drive farm financial success:
- Continual, lifelong learning.
- Business decisions made using accurate financial data.
- Seek the help of business advisors/consultants.
- Have a written business plan, follow it, review annually.
- Know and monitor your cost of production and what it means for your profits.
- Assess risks and have a plan to manage and mitigate risk.
- Use a budget and financial plan to monitor position and options.
Here is a benchmark study that Global Ag Risk Solutions created by combining 9,000 individual years of data from 2011 to 2015, using farm financial data collected by GARS from across the Prairie provinces.
The chart below shows the average of all farms surveyed. The average is compared to the results from the top 25 and bottom 25 per cent of included farms. The data speaks loud and clear to me and reinforces the seven key practices mentioned earlier.
There is quite a gap between the “average” farms and the “top 25 per cent” farms when you look at the revenue, gross margins and the net income. The opportunity to improve is certainly there. If the top 25 per cent can achieve those numbers, so can the rest, with some change in focus or farm management practices.
Those farms that know their numbers and farm aggressively, agronomically, are seeing exponentially better gross margins and net income that calculates out to significant extra dollars of profit at the end of the year.
Having a written business plan and marketing plan are key to helping you stay focused on the business.
Know your risks and have a plan to mitigate them. Production and marketing risks are two of the key ones you face each year. The weather variable that can throw a wrench into the best written plan
Track and monitor your financial progress throughout the year.
Track your marketing progress as well, to see how you are doing based on your plan. See if you need to make any changes to the plan if conditions change.
Farming is a big dollar business. If you want to be the best of the best you need to be doing what the best farmers are doing. The surveys and data prove that what they are doing makes the difference.
Visit the Farm Management Canada website for more great information and farm management resources.
*Note: An earlier version of this article said that this information was presented at FarmTech. That was not the case.