Here are the top 7 ways financial advisers suggest you update your farm business plan

Are you still operating status-quo even as the industry changes around you? Are you taking advantage of every opportunity to feed your business as you feed the world?

In today’s rapidly evolving agricultural landscape, staying ahead of the cycle is essential for the success and sustainability of any farm business. An updated and thoughtful business plan can help you navigate the complexities of the industry, manage risks effectively and seize new opportunities.

“Having operating procedures and looking at your farm as a business is critical, especially when margins are negative to thin,” says Thomas Eatherly, principal with Pinion Global. “Evaluate the market around you, instead of assuming you’ll do the same thing with what you have.”

Here are the top seven ways to refresh your farm business plan, ensuring it remains relevant and robust—and so does your farm.

1. Reconcile Your Accounts and Inventory

One of the most fundamental aspects of a solid business plan is financial accuracy. Many farmers create budgets but fail to reconcile their accounts at year-end. “Everyone does a budget. A very small percentage ties it out at the end of the year,” Eatherly says. It’s crucial to tie out your budget with actual figures to understand your financial performance fully. This should involve:

• Reconciling accounts: Ensure all of your business accounts, operating loans and inventories are accurate and up to date.
• Meeting with advisers: Set up regular meetings with your board of advisers to review financials and make necessary adjustments.
• Evaluating risk management plan: Book risk management strategies for both the current and upcoming years to protect against uncertainties.

2. Implement Strategic Planning and Automation

Strategic planning involves looking beyond day-to-day operations to ensure long-term success. Eatherly says one way to achieve this is through automation, which can significantly streamline your back-office processes. “Have a good system in place to save time and labor,” he says. “You’ll be surprised how much of a difference it makes, especially when someone wants a day off or is out of the office unexpectedly.” Consider the following:

• Automate bill payments and payroll: This saves time and reduces the risk of errors, allowing you to focus on more strategic tasks.
• Systemize operations: Implement systems that save time and labor, ensuring efficiency across your operations.

3. Evaluate Crop Performance and Cash Flow

Understanding the performance of your crops and managing cash flow effectively are vital to maintaining profitability. Take the time to:

• Analyze crop results: Identify which farms and fields performed well and which didn’t. This data can inform both future planting and business decisions.
• Project cash flow: Know what your potential cash flow looks like in different scenarios, including sub-par environments, to prepare for any financial shortfalls.
  As Eatherly says, “Not knowing whether there’s going to be a profit or loss could lead to poor decision making.”

4. Optimize Land and Resource Management

Effective land and resource management can enhance productivity and profitability. That means regular conversations with landlords and other stakeholders, to determine cost breakout and management. Engage in proactive discussions and initiatives such as:

• Asset improvement: Look at the assets you have and consider how you can make money outside the farm without disturbing the farm. That could mean installing tile, doing custom application or investing in improvements such as grain bins and other systems to increase efficiency.
• Cost-sharing: Discuss cost-sharing opportunities with landlords to reduce expenses. Examples could include ditch and drainage improvements.
• Quarterly reviews: Hold internal discussions at least quarterly to assess land and resource management strategies.

5. Foster Vendor and Stakeholder Relationships

Building strong relationships with vendors and stakeholders can open up new opportunities and improve decision-making. Eatherly says it’s something few think of that can have huge rewards. Ideas to foster these relationships include:

• Regular communication: Meet with equipment providers, grain merchandisers and other vendors often to understand their needs and expectations.
• Explore opportunities: Ask what crops they’re looking for or what equipment they want on trade. That creates a relationship with your vendors and also helps you create a premium niche. You can examine opportunities and make capital decisions better based on future opportunity.

6. Enhance Accountability and Ownership

Accountability and clear ownership structures are essential for smooth operations, especially in a family-run farm. Ensure:

• Transparent procedures: Create non-negotiable operating procedures to which everyone adheres, fostering a transparent and accountable environment.
• Updated buy-sell agreements: Review and update buy-sell agreements regularly, especially as younger generations become involved in the farm, to avoid conflicts and ensure smooth transitions.

These seven steps will help you better navigate the cyclical nature of the agricultural industry and also find and capitalize on new opportunities for growth and success.

The future holds many options for robotics to help producers level up conservation and make it more profitable.

7. Regular Financial and Operational Reviews

Regular reviews of your financial and operational performance help you stay on top of your farm’s business health. Key actions should include:

• Yearly balance sheet evaluation: Compare your balance sheet year-over-year to understand the farm’s financial health and make informed decisions.
• Understand loan terms: Be clear on the terms of your loans, including collateral, security agreements, maturity dates and interest rates.
• Utilize vendor financing: Con-sider vendor financing options, which can offer lower interest rates compared to traditional loans.

Updating your farm business plan isn’t just about making incremental changes but about adopting a holistic approach to ensure sustainability and growth. By reconciling accounts, implementing strategic planning and automation, evaluating crop performance, optimizing land management, fostering relationships, enhancing accountability and conducting regular reviews, you can keep your farm business plan relevant and ready to address any change, economic or weather related, that comes your way. These steps will help you better navigate the cyclical nature of the agricultural industry. They will help you find and capitalize on new opportunities for growth and success.