Agri-Trend Launches Farm Business Management ServicesPosted in: Business By Kim Gerencser October 1 2012
Farm Business Coaching … what does that mean?
By Kim Gerencser, AGRI-TREND Business-Coach™
You Don’t Know What You Don’t KnowI’ve been asked this question dozens of times since I joined AGRI-TREND as an AGRI-TREND Business-Coach. In the words of our CEO, Rob Saik, AGRI-TREND Farm Business completes the critical trilogy in prairie grain farming: grow the crop (Agrology,) sell the crop (Marketing,) manage the money (Business.) But AGRI-TREND Farm Business is far more than simply “manage the money.” So to the question of “What is an AGRI-TREND Business-Coach going to do,” I think that the best way to respond is with another question: “Well that depends on what do you want for your farm?” Are you interested in a picture of where you’re at, or a map of where you’re going? Do you want to grow the farm, or sell the farm? Do you want to know how you compare to other successful farms not only in your province and country, but internationally.
Think about it: if you didn’t learn something on your own through your own experience, or if someone didn’t bring the knowledge to you, how could you ever know it? I have this conversation with my Dad a lot as he watches my brothers and I farm alongside of him. His perspective of the world has been based on his set of experiences and contacts made from his Cupar, SK farm.
The approach to farming that my brothers and I bring to the farm is far different than his. The reasons we make the decisions we do is based on our perspective, which comes from our workoff the farm in various facets of the agriculture industry. The reality is by bringing all of our experiences together on the farm we are better. We make better decisions because my Dad “didn’t know what he didn’t know” and conversely we learn there is stuff that we simply didn’t know.
Many of you have taken it upon yourselves to find out what you don’t know. And there is no doubt that you know more about your farm than anyone. Your approach has brought about manyinnovations on your farm, but are you confident it’s enough to take you and your farm through the numerous and sometimes daunting challenges and opportunities of modern grain farming?
Farms are changing. They’re bigger. They’re fewer. They’re growing larger crops. They’re profiting more. Absentee landlords are growing in number. There is a shift to more rented land. The 2011 Ag Census is painting a picture as described above. In brief, between 2006 and 2011:
- The number of farms in Canada decreased by 10.4%
- The average farm size increased by 6.9%
- The percentage of farms that incorporated increased by 23%
- The number of farms reporting $1million or more in gross farm receipts rose by 31.2%
Read the full census at http://www29.statcan.gc.ca/ceag-web/eng/indexindex
How does your farm look compared to five years ago? How have the drivers changing the agriculture industry affected your farm and how you make decisions? These changes in our industry are happening faster… are you able to keep up? Are you in a position to be proactive to these changes, or will you need to be reactive?
Access to adequate capital; this is a common current-day battle-cry in our industry, but let’s not rehash it here because we all know it, and have felt it at some point or another. Cash and cash flow went from being something we live with and deal with regularly to a crisis in 2008. Capital dried up, banks were not lending, and if they were, it was only to their most solid clients. In Canada, it was not as serious of a crisis, but we still felt that pain. And if it wasn’t for near record commodity prices in 2008, Canadian agriculture would have also felt that pain…and it would have been crippling. With or without a global credit crisis, inadequate cash flow and working capital in any business is a killer. Many good businesses (and that includes farms) are limited in their ability to borrow for that very reason. This can force decisions that are less than ideal. Sound familiar?
So how good is your relationship with your banker? We all want a relationship with our banker that is respectful, open, and mutually beneficial. Your lender needs to understand your farm, and farming in general…he/she needs to know what you’re looking for and why. But you also need to understand credit requirements, and what your lender is looking for and why. Inadequacy from either party can bring challenges to, or possibly a breakdown in, the relationship. And how does one access adequate capital to grow their farm without a good relationship with a banker?
Lenders have offered thoughts. Lyle Bateman, Agriculture Relationship Manager with Conexus Credit Union in Regina wants to see more clients make sure they have a “good understanding of the financial side” of their farm. “Many farmers use consulting services to assist with agronomy and marketing, so having somebody to help out on the financial side should be a natural fit,” says Bateman.
Doug Yaremko, Scotiabank Director of Agricultural Banking for Saskatchewan and Manitoba knows of “a number of large producers (that) are lacking the resources to manage the financial complexity of a good sized business.” They often don’t understand why a banker is asking for so much financial information; it frustrates and annoys most farmers to have to go through the exercise that bankers put them through.
Gwen Paddock, National Manager Agriculture & Agri-Business for RBC says, “In addition to being a good production manager, a farm manager needs to be a skilled general manager – in a sense, they are moving from the tractor seat to the boardroom table.” And if you’re a farmer who prefers to be in the tractor seat versus the chairman’s seat, we know it’s safe to assume that you don’t want to deal with financial rhetoric. This can then create more challenges for a business.
“As farm businesses evolve, a plan is needed; but more often than not, no planning happens until there’s a positive or negative experience,” adds Yaremko. Of course, over the last few years there’s been more positive than negative experiences (regional environmental anomalies are the exception.) Do we only need a plan when things aren’t good? Common practice would indicate so, but it must be recognized that the most successful businesses are constantly planning, in good times and bad. So if you’re only updating and adjusting your business plan at the time of a positive or negative event, you’re leaving your business in a precarious position. Yaremko said that another risk that must be acknowledged is “how to manage success.” Let’s put that in perspective: how many times have you seen successful businesses grow themselves to bankruptcy? A business without a plan can get caught up in the euphoria of recent success and wake up one day to find themselves in dire straits. How? Taking on too much debt, or taking on the wrong kind of debt; HR practices that are reactive instead of proactive; not adequately preparing for market cycles; incorrect use of working capital; etc.
These lenders have a wish list that includes:
- Better financial routine, controls, and reporting;
- Strategy and structure to growth plans;
- HR management practices;
- Recognition of the drivers that are changing the agriculture industry, and plan to adapt accordingly.
An AGRI-TREND Business-Coach can help you understand the importance of what your banker wants and how to meet your banker’s wish list. The goal is a healthy productive relationship with your banker which is critical to smooth operation on your farm.
Hundreds of farmers have unlocked the yield potential of their crops by working with an AGRI-TREND Agri- Coach®, or managed their market risks, cashflow, and selling prices by working with an AGRI-TREND Market- Coach. Can we bring the same dedication, expertise and results on the business management side? Absolutely.
So let’s go back to the original question of “What will an AGRI-TREND Business-Coach do for my farm?” An AGRI-TREND Business-Coach will:
- Provide insight into the significance of your cost per unit of production,
- Compare your financial metrics to other successful farms to BENCHMARK your farm and its future goals, (confidentiality and privacy always)
- Offer guidance on “bulletproofing” your balance sheet so that you can weather future down-cycles in the industry,
- Lead your Succession Planning process,
- Help you develop, and act on, your 5 year plan (you have one, right?)
- Decipher your best allocation of capital,
- Conduct HR Strategy Sessions,
- Offer guidance in constructing appropriate borrowing strategies and investment strategies
So when I’ve answered the original question with the points listed above, I usually get a response like, “Oh, that sounds really good!” You bet it does. You’re not just growing crops anymore; you’re running a multimillion dollar business that is dancing on the international floor. Your business just happens to be farming.
And if you’re running a multi-million dollar business in an international market, can you afford to make decisions when “you don’t know what you don’t know?”
The first step in The Strategic Farm Business Plan™ is The Farm Financial Checkup™ and we are offering this service this fall. This process will provide you with a clear picture of the current position of your operation, and is a great first step into further business planning.
We can conduct a FarmFinancial Checkup™ for you.
If you want to complete your critical trilogy of your farm operation, call or text me at 306-533-5474, or toll free at 877-276-7526. My email is KGerencser@AGRI-TREND.com.
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