Although the majority of farmers do well as producers, they typically are not very confident with respect to their management skills. For this reason, we asked our readers to share their best advice for management: what they do that makes a significant impact on their bottom line. Here are their five best ways to become a better farm manager.
Think like a CEO
Your agricultural endeavors are a business, period. You know that all businesses have a CEO responsible for considering and making major decisions, and in your farming enterprise, the CEO is probably you. Start thinking like one!
Kip Tom, of Leesburg, IN, began this kind of strategic thinking in 1985 when his farming consisted of 1,500 acres of soybeans and corn. At that time, his profits were less than stellar, leading him to even consider leaving farming entirely. However, the Toms chose to approach their farm like any other business, to get more dollars from their management time. By planting specialty crops as a new “product line”, they started to “seek out the best of the best procedures that we feel we can adjust to our business, from companies inside production agriculture and outside the industry,” he said. Now, the Toms are Pioneer’s biggest seed grower with operations in Argentina and Indiana. The family business includes fresh vegetables like tomatoes and cucumbers, identity-preserved crops, and a trucking operation.
“I have always felt it is important to steer your business in the right direction to stay competitive,” explains Kevin Green of DeWitt, IA. “Through good financial management and above average marketing, growth is attainable.”
Rather than getting stuck on the treadmill of day-to-day operations, farmers like Tom and Green try to be CEOs, thinking strategically about the future to make sure they’re positioned for profit.
Make employee meetings pay off
Meetings can be huge time-wasters, both in traditional businesses and on the farm, particularly as more workers and managers are hired in larger operations. And yet, meetings can be an important tool in farm management.
Jorgensen Land & Cattle of Ideal, SD, use written agendas to keep meetings on track and guide discussions. Greg, Cody and Bryan Jorgensen have a 6:30 a.m. meeting every Monday morning using an agenda that they keep on a spreadsheet. Then at 7 a.m., their CFO reviews the accounts receivable and payable along with other figures. Finally, at 8 a.m., the other farm employees join in on the meeting. Their agenda always involves reviewing the minutes from the previous week’s meeting, Bryan says, in order to update the status of their to-do items, which they then update in the current meeting. They also usually discuss a safety item, as well as the chore schedules for the upcoming weekend.
Their weekly meetings are supplemented by the daily lunch served to their employees and visitors, including buyers for the bulls on the farm. “The Monday morning meeting puts in motion the entire set of activities for the week, and gives the employees a chance to set priorities,” explains Bryan. “Lunch gives us all another opportunity to network on a daily basis.”
Switch to managerial accounting
In managerial accounting, production information and finances are integrated so as to be able to evaluate expenses, revenues, and costs based on appropriate production units. According to Iowa farmer Ron Swanson, who also recently served as the president of the Farm Financial Standards Council, this is the most effective way to have an accurate picture of a farm’s costs and where the business should focus more time.
“Most of the benefits of managerial accounting will accrue to the larger, more complex, multi-faceted operations,” he describes. “It is an internal reporting concept where the management team uses the information to make operational and strategic decisions for the farm as well as evaluating performance of the employees and the segments of the business they are responsible for.”
Agricultural production has traditionally used a cash-based enterprise approach, but accounting is based upon the principles of cost and profit centers. This gives farmers a clearer understanding of what is driving the cost of production and the ability to connect financial analysis to strategies that can improve their financial performance.
“Even though market prices are currently at historic levels, expenses are rapidly escalating as well,” Swanson says. “This gives you the ability to determine the levels of profit after all costs are allocated and evaluate the different options quickly in this uncertain environment.”
Hire the right people
In any business, farming or otherwise, good people are the difference between average and great. “I have always followed the principle of hiring a ‘good’ person for jobs – honest, reliable, committed, and willing to work,” explains Harley Sietsema, a turkey and grain farmer from Allendale, MI. “That also means someone who has exceptionally strong references or has a family background that I am personally familiar with. If I can find such candidates, I will find the work for them.”
Outsource key roles to specialists
As businesses expand, operators need to determine what specialized skills, analysis, and information can improve their enterprise. When you realize that you are not the best person for a particular role, you need to hand that responsibility over to someone who specializes in that particular area.
“We’ve always relied on people with specialized skills like accountants for taxes or veterinarians for livestock, but as our operations get larger and larger, we will need to do that more and more,” according to Kevin Dhuyvetter, a farm management economist for the Kansas State extension.
But, when a farm’s operations expand to a larger size, many of those tasks that were outsourced can be returned to an in-house role. “So, rather than hiring an accountant to do taxes, some of these large operations will just hire the accountant as an employee, and maybe part of the year they’ll actually be doing some fieldwork, who knows,” Dhuyvetter says. “Successful farmers will recognize when to micromanage and when not to.”