In today’s economic environment, it is sometimes easy to get caught up in negativity where the “cup half-empty” approach almost begins to feel normal. In reality, a negative perspective often masks opportunity and vital adjustments. At a recent conference, one producer reminded each of us just how interrelated perspective and success can be. In a room marked with pessimism, this producer asked, “What are the top 3 opportunities producers should look for in the next 24 months?” What great way to turn the focus!
While opportunities will vary for each operation, let’s take a broad approach. Over the next five years, there will be more opportunity to grow and expand the business than was present during the agricultural super cycle. First, more of the older generation is motivated to move out of agriculture. In fact, one-fifth of American farmers have no next generation or family to which they can pass the business. These are real opportunities, both for those entering the industry and those looking for expansion possibilities.
In growth or acquisitions, do your homework carefully. Specifically, run various economic scenarios. How would farm finances be impacted if corn and soybeans remained at the current price levels or even declined? By what percentage would the business need to cut expenses in order to maintain profitable margins? Additionally, identify the areas for potential cuts.
If borrowing money, consider the value and cost to your operation. Will borrowed capital provide needed working capital reserves for growth, or will it place constraining debt levels on the business and flexibility? Whenever one considers a new business opportunity, these are important questions to ask, and especially in an economically challenging environment.
Another area of opportunity comes from the opposite side of the business. Instead of growth, the opportunity may be in re-organizing the business into a smaller scale operation. Tough economic times call for balance; and more pointedly, a re-balance of business and life priorities. Shed unproductive assets. After all, if the business has experienced negative margins for an extended period of time simply to maintain size, it has become a recreational farm. There are already several challenges to profitability today, so be careful not to let your pride become another. The uncertainty of changing the business can seem scary, but the ability to re-create is powerful and endless!
As an example, a couple farmed approximately 30,000 acres. During the height of the super cycle, they decided to reduce the operation by dropping 18,000 acres of rented land. They also eliminated an unproductive family member and scaled back the overall operation. Of course, this seemed a bit odd at a time of record prices. However, today this business is booming. The couple considers these decisions among their very best in business yet.
Over the next 24 months, take the opportunity to re-create for profitability and sustainability. There will be several, valuable educational conferences and seminars in which to participate, both online and in-person. These opportunities showcase new ideas, improved technologies and strategized business practices for today’s economics. However, do not forget that perspective is critical. Find ways to improve and maintain good physical health. The strengths of the mind, body and spirit are the most important components in your business plan and in life. It is true that one’s focus becomes his reality. So, a focus on opportunities may be the best way to success.
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