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Improving your farm today for tomorrow’s growth

When I am working with the most successful farm business families, there are some clear areas where they seem to focus their efforts. They understand the critical balance of work “on” the business and “in” the business. In preparing for this five-part series on how farmers today are continuously improving, one area that I kept coming back to was their commitment to take the time to run their farm as a business.

I recognize how difficult it is to look too far ahead on the business side. We are clouded by the day’s work. Our heads are down working and sometimes we just can’t seem to be proactive instead of reactive to the daily needs of the farm and business.

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Farmer and Financial Advisor

We have all been there. We have good intentions on some of the things we want to get to, but never seem to have the time or resources to get there. That was the fact in my family business. Things would happen like the tractor wouldn’t start (even though we’d plugged it in during minus-30-degree weather), then we were rushing to feed the cattle and it felt we spent the entire day behind, never getting ahead of the things on our mind from the night before. Which, of course, were the important things that matter.

Farms today have so many innovations available to improve how we use our time. We can have the robots milk the cows while we are mixing feed, cleaning up the manure pile, or working on herd health. We can put the tractor on autosteer, while we are searching our phone for the bank manager’s phone number because we need to see if we can get the money to buy the next farm.

There is often a resistance to this innovation with some generations. Our young farmers today are quick to learn and anxious to see these innovations enter the family farm business but too often the generations are conflicted about adopting change. My father’s generation would wear many hats — they were jacks-of-all-trades and masters of none.

In today’s world, we have access to specialists, but their specialty is all they do. The generation of leaders we see rising in the farm community today have realized they can either spend two days messing around and trying to learn some skill they’ll only use once a year, or they could simply keep doing what they do best and hire someone to do this job for a fraction of the time.

Today’s next generation is much more comfortable farming out these seldom-needed tasks and focusing their efforts on what they do best. It’s how they leverage their time and skills.

It’s clear when we review the financial success of the farm families that embrace this culture, they are making money, they know what part of their business is most profitable and they ensure that this is where they focus their time and efforts. Everything else is “farmed out.”

A good example is a young farmer near my place who immigrated about seven years ago from Holland. When I visited his farm and asked him to tell me about his operation, he said, “I know how to milk cows and that’s it.”

His farm is only 100 acres but it milks 500 cows in a sophisticated, robotic setup. They do not grow feed or animals. Instead, he buys in his replacements and sells anything that calves there. They raise no young stock. He also told me: “I never was good in the field. There are so many others who are better at growing crops than I am. I don’t have time to spend on raising calves. We are a milk farm.”

At first glance, you would assume that would be an expensive way to farm — buying all your inputs. But he had the difference in time and costs down to a penny raising the next gen dairy cow versus buying the one you want when you need her.

His dairy is more profitable because of the focus he gives to the cows and because of the focus he is able to put on his targets for quantity and efficiency of milk production.

We have all heard that the next generation wants to work smarter, not harder. I have experienced parents that feel this means they are lazy or trying to take short cuts. So many of us think we need to put more hours in to get more profit or revenue out, but that is not always the case.

There’s room for us to think more along the lines of “at what point is my time and money maximized in my operation?” Or “what is the best use of my money in the business?” “How can I get the biggest return on the dollars I reinvest in the business?”

When we are at conferences and industry learning events, I am pleased to see so many young people with an appetite to learn. They want to take knowledge back to their family farm. They want to be better, and I’m encouraged by their hunger for education.

We need to empower this spirit by acknowledging it. It may be a way to bridge some communication gaps. Maybe we should share how we went to meetings like junior farmers or 4-H to meet other young farmers with similar challenges (parents that were controlling) and ended up enjoying the educational aspect and resources offered.

At the end of the day, there are countless jobs to be done daily on the family farm and it is a challenge to find balance on how you spend your time in and on the business. There are a number of ways we can utilize innovative ways to farm, or find ways to prioritize our days better. But a simple place to start is to focus on what we are best at and consider the value of utilizing others in areas where we are weak to create some efficiencies. We could think differently about where and how to spend our time.


A simple exercise

Start with an average day “in” the business. On my neighbour’s dairy farm, that might mean mixing feed, feeding calves, feeding cows, cleaning out the calf barn, cleaning out the cow barn, feeding yearlings, milking cows…

Then think of your other role “on” the business: meeting with your bank manager, reviewing financials with the accountant, meeting with a neighbour about a contract for their land for the next five years or the ability to purchase in the future?

Then attach a rate and prioritize them. Take a hard look and see if there are roles that someone else could do in order to free up time for you to focus on the priorities. Ask yourself: what is the most important thing in my business today. Is it to work on the tractor or to contact the bank manager to see if I can re-negotiate the terms of my loans and amortize over a longer period so I can cash flow a new farm purchase.

The next step is to shift your focus on revenue. Evaluate how much your labour generates. What is your unique ability? Are you the only one who can sell the commodity or run a certain piece of equipment? What is that role worth?

Could you hire someone at $20-$25/hr. to allow you to focus your time on an area that generates more dollars?

Darrell Wade is a certified family enterprise adviser and a CFA-certified farm adviser. He is the founder of Farm Life Financial Planning Group and can be reached directly at [email protected].

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Darrell Wade is a certified family enterprise adviser and a CFA-certified farm adviser. He is the founder of Farm Life Financial Planning Group and can be reached directly at [email protected]

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