Now is a good time to plan

Mid-winter and the wrapping up of year-end books is a good time for farm families to take time for business planning. We generally characterize farm management as having three big questions:
1. Where are we?
2. Where do we want to be?
3. How can we best get there?

Question 1. Where are we?, is aimed at determining the current position of the farm, from a business competitiveness standpoint. What is the financial position of the business? Is it profitable? What about solvency, liquidity and financial efficiency? Are the financial, business and personal goals that have been set out being met? Financial analysis using balance sheets and income statements is necessary here. SWOT analysis – strengths, weaknesses, opportunities, and threats can help visualize where the business now stands.

Answering question 2 is all about goal setting. Farm families are encouraged to write down business/financial and personal/family goals and revisit them annually to see how well they are being met. The process of setting goals and prioritizing them is not trivial, and helps to illustrate the trade-offs that exist between many of the aspirations that people have. Examining how a farm can move towards and reach its’ goals is the last question to be answered. This process can be aided by long-term and transitional farm planning, which fortunately is now made simpler with various computer software programs available to farmers and offered through many Extension offices.

Planning is not always easy or fun to do. But it is an important task for the farm manager and others involved in the operation to undertake. Remember – if you don’t know where you are headed, how will you know when you get there?

Posted by Kevin Moore