Looking at the title of this article, and perhaps knowing a bit about me, you might short circuit a little bit and wonder why I (horticulturist, plant nerd and plant disease guy) would ever think that I would have the qualifications or knowledge to write on such a topic. And you would be correct. You’d be behind me in a line of people pointing out my weaknesses in this area.
However, while I am fully and brutally aware of my lack of knowledge in many areas, I have several qualities that make up for it, when it comes to practicing my profession and serving my clients. First, I acknowledge and accept my knowledge gaps. Second, I have a wide network of smart people that I am completely willing to draw upon to meet the needs that my clients have, whatever those might be.
And so, here we are again at the start of the article. This past week, in an effort to expand the ways that I provide information to my clients and others within my circle of influence, I conducted a series of interviews with knowledgeable experts. You will now (and in future) see those interviews laid out in videos on my YouTube channel under a Playlist entitled “Conversations”.
This week (and next week, for Part 2), I interviewed my dad. Now, before you question the relevance of that, my dad is president of John Spencer and Associates Inc. and has decades of farm finance and farm management expertise and experience. He does everything under the umbrella of farm business management consulting, from planned economics to strategic planning. He’s worked with many farmers over the years, helping them to right their financial ships.
You can find the complete video here (Farm Financial Management Blips – Part 1).
In our discussion, we talk about some of the most common mistakes that farm producers make when it comes to farm financial management. Here is a summary of that conversation and some of the points that are raised.
Bad recordkeeping
It is critical to keep good records (throughout the year), particularly ones that relate to all aspects to your operation, including your economics, but also production records, etc. You should also be reviewing these records regularly, as this allows you to capture and analyse trends within your operation. All of this will help improve your decision-making.
Lying to yourself
Lying can include being overly optimistic about a certain element of your operation that will “save” you or “fix” the issues that you might be experiencing. But consider how likely that is to actually happen, based on the aforementioned data and records that you keep.
Lying to your bank
The bank is someone that is a critical part of keeping your operation going. You have to play it straight with them, so that you are able to protect the relationship that you have. It is hard to find a new banker, especially in the present.
Get too busy to make sure that you are doing the right things
Don’t get so busy doing the work that you don’t make the time to check to make sure that you are focusing on the right things. If you get so focused on doing, to the exclusion of the “screaming priorities”. It might be satisfying in the short term, but it isn’t a success-based formula.
Be too aggressive for current markets or current trends
If you are pounding money into projects that are potentially profitable, but haven’t had a rigorous review or assessment, you might find them go sideways when things happen (like a pandemic).
It is important to have sustainable and careful growth, rather than focus your efforts on the quick profit grab, which can pay off in the short term, but can come back to bite you.
Neglect to involve the lender in decision-making
If you are planning on doing something that involves significant change to the structure of your operation, whatever area of your farm that might fall in, talk to your lender, and keep them informed. Keep them on side. No one likes surprises.
New Producers
For the new producer or new entrant, how can you be successful? It can be hard (a.k.a. almost impossible) to have personal data to show to a lender. In this case, it is important to gather as much information as you can (whether book/conceptual data or personal data) to help you show what you are going to do and to take to your lender.
There are a number of supports and pots to draw upon. Make use of industry mentors, an experienced individual or two who can help you get where you need to be. You can also use consultants, who can help you navigate some of the pitfalls, and help you to avoid some of the troubles that will inevitably arise.
Conclusion
Whether you are a new or experienced producer, whatever you might be growing (or be considering growing), these mistakes are common, but are definitely avoidable.