Farm Horizons • Feb . 6 , 2017 • Page 16
What are your strengths ? Where are your weaknesses ? What can you do to take advantage of those strengths , and what can you do to minimize the weaknesses ?
For many of the farms that I work with , the ethanol shares have been very favorable , partly due to the fact that it is close . It is cheaper to deliver corn to Winthrop than it is to deliver corn to Savage . Can you produce corn , soybeans , milk , or pork cheaper than your competition ?
One of those costs of production on any farm is the cost of family living . The biggest issue in my mind with the cost of family living for a farm family is that they don ’ t separate these costs from the farm expenses . The household electricity and other utilities are paid by the farm . Vehicle expenses are paid by the farm .
One of the biggest challenges to farm transition is to identify how much income the retiring generation needs for family living . The easiest way to manage this expense is to have separate accounts for the farm and for family living . Take a monthly draw from the farm , and transfer this to the family account . If you are truly operating your farm as a business , then you need to treat yourself as an employee by drawing a salary and then living within that salary .
Be reasonable with that salary . What can the farm support , and is there any off-farm income to help cover family living expenses ? If you butcher a steer , the family account should pay the farm account for that steer and the processing . If you are going to help your kid with fuel and car expenses while they are in college , this is a family expense , not a farm expense .
I would urge you to go through your balance sheet and identify any assets that are not being used , or are under-used . Are you holding on to a piece of equipment because it was the first tractor that you purchased , or because you have so much equipment parked in front of it that it would take you all day to get it out of the machine shed ?
I remember a conversation with a farmer many years ago about it being a good idea if he could use a rotary hoe on a field . The response was that he owned one , but didn ’ t have the time to move everything out of the way so that he could use it . At that point , the rotary hoe had zero value , because he wasn ’ t willing to move machinery so that it could be used .
Look at what filters , belts , etc . you have on hand before buying more . I am an advocate for having critical parts on hand , but do you need six filters for one tractor ? Reduce parts inventories to what is needed to keep the critical machines running for your operation . Go through your parts and identify what machine they are for . You may have six different sets of belts on hand , but could you grab the correct one when needed ?
In review , the difference between surviving 2017 or thriving amounts to doing a lot of small things correct . There is not a magic pill to swallow that will make the difference .
Know your numbers ; this includes financial ratios and costs of production . Have a plan ; both cash flow and marketing plan . Plans need to be written , we commit to something that is written better than if it is just a thought process . Separate business and family living expenses , and keep them reasonable . Be lean and mean with equipment assets ; remove un-used or under-used equipment . Monitor hours , especially on critical machines ; can you run that skid loader that you use every day 3,000 , 5,000 , or 7,000 hours before major expenses would be an issue ? Use existing parts and supply inventories before purchasing more . Avoid unnecessary expenses ; how many tools have you purchased because you may need it someday ?
Set two or three goals for the year , write them down and post them somewhere that you will see them every day . A Harvard study shows that the 3 percent of Harvard graduates who had written goals at graduation earned more after 30 years than the other 97 percent combined . How would your farm operation fare if you outperformed 97 percent of your competition ?
Be profitable . •
Lano Equipment of Norwood , Inc .
( 952 ) 467-2181
1015 W . Hwy 212 , Norwood Young America 55368