Plan ahead,” we always say. “Make a plan.” In fact on the farm, the most familiar four-letter word has just about got to be “plan” — defined in this case as a scheme, program or method worked out beforehand to accomplish an objective. How often do we find ourselves saying, “It’s all in the planning,” and then nodding wisely.
But is it true?
While accountants, lawyers and advisers can help to clarify goals and objectives, and to define paths that might reach them, it’s we as producers who will ultimately do the things that need doing to bring about the results. And the doing — not the planning — might be the toughest part.
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“Farmers are the classic guys who will make a $25,000 decision on the way from the barn to the field,” Bob Tosh tells me.
Clearly, that kind of decision-making isn’t part of a good plan. But Tosh isn’t so much critical as realistic.
“I would say more aren’t planning than are, and it’s because they don’t understand the value of it,” says Tosh, a farm management consultant with Meyers Norris Penny in Saskatoon. “There are measurable differences in return on investment from having a plan in your head or having it written down.”
“The Allies in Normandy couldn’t predict everything but they had a plan for when they got there. They didn’t arrive and say, ‘okay we’re here, what’s next,’” Tosh says. Things can come at you sideways, like flooded Prairie fields, but a strategic plan will give you a far greater chance of getting through, he says. “Planning isn’t about predicting the future, it’s about having direction and focus.”
Good planning is also about making a commitment to good planning, and then an equal commitment to using that planning to make things — the right things — happen.
“There are some people who write things down for the sake of writing them down,” says Amanda Hammell. “But how will this help if there is no commitment to the process? You can’t just go through the motions. The information has to be accurate, there has to be integrity of the data.”
As a senior account manager with RBC in Hanover, Ont., a member of the Central Ontario RBC ag team and a Canadian Association of Farm Advisors (CAFA) member, Hammell knows money and planning. Raised on a mixed farm and a current partner in a purebred cattle operation with previous dairy experience, she also knows agriculture.
Her work portfolio includes dairy, beef and grain clients. “Every farmer plans, but the degree to which they plan is based on the complexity of the business,” Hammell says. Big or small, if they want money from Hammell, she wants to know what their future looks like and how they plan to get there.
The more an operation wants to borrow, the more planning Hammell wants to see, like forecasts, budgets, cash-flows, intended production, estimated yields, and marketing plans.
“They have to learn to do it,” Hammell says, who then adds a line that seems to carry more weight than its short words might suggest: “And they have to like it.”
While she wants to see a plan, Hammell believes many farmers are put off by the idea it has to be a 30 page manuscript. Not necessary, Hammell says. The content is what’s important, including goals set for one or two years ahead with projections for five years out.
The plan should also be clear up front about how you are going to measure for success. All decision makers need to be involved in the process so everyone is moving in the same direction. “The biggest issue here is, what is the definition of success: money, happiness, health, family. Everyone needs to know what this is so that at the end of the day you can measure it,” Hammell says. “The more complex an operation, the more people involved, the more responsible you are to each other.”
Knowing what you’re after dictates specific actions. If money is the determinant of success, is it measured in profit or margin, and how big must you be in order to be successful using this measure? Maybe success is in production and yields. Or perhaps marketing is a goal measured in a specific budget figure.
Hammell uses the example of a cow-calf operation that has traditionally marketed to a local auction mart once a year. If their goal is to increase sales by 10 per cent, they must specifically market that way and choose sales times accordingly.
Know your numbers, which means good bookkeeping, Hammell says. “If you hate it, hire it out because at any given time you need to be able to tell within 30 days where the farm is at financially in order to deal with things like equipment breakdown and such.”
Tosh points to four planning must-haves:
1) PEOPLE
“Poor communications is something farmers excel at,” Tosh laughs. But learning to manage people and communicate to them is critical. Amongst the decision makers on the farm, there need to be common values and a shared vision, and these in turn need to be articulated to everyone. Family, business partners and employees are all integral to the success of a plan, says Tosh. “If you don’t get the people right, you can forget it.”
2) OPERATIONS
“This is where farmers excel. They can talk to you all day about this one,” Tosh says. But producers must be careful not to let a focus on day-to-day work steal time from management. “On a 10-to 15,000-acre farm you are not going to be sitting on the tractor. There is now more value in sitting in an office and letting someone else run the tractor,” Tosh says.
Consolidation of the industry and growing farm size leads Tosh to wonder, “What are these guys going to do when the farm gets too big if they don’t learn how to delegate and leverage out work? There are only so many hours in a day, so if you do everything (yourself) then that in effect becomes your constraint.” So operations is a lot about people as well.
3) MARKETING
Tosh admits this isn’t the easiest area for many farmers. “You have to kick back against fear and greed, which are human nature,” he says. Age, debt level and risk threshold all play into marketing decisions. Maybe most importantly, producers must ask themselves, “am I any good at it?” If not, don’t be afraid to depend on someone who is.
4) FINANCES
Know your numbers, whether it’s operations numbers such as yields and bin space or key performance indicators such as liquidity and profitability, and use them to make decisions. Remember the guy who spent that $25 grand en route from barn to field?
So now you’ve got a plan, you’ve got the right people involved, and your numbers are up to date. What now? Tosh outlines the steps from plan to action. See table above.
If your plan doesn’t work, perhaps because it rained for eight weeks when you needed to seed, you go back and review your goals and plans, and you start again. “It didn’t all go smoothly for the Allies when they landed at Normandy,” Tosh says. “When the plan didn’t work, they didn’t just go home. No, they had a setback but they still needed to get to Berlin.” Commitment to the goal is key.
Hammell is only too aware of the risk and uncertainty of farming. “I’m a firm believer in the idea that you make the best decision you can with the tools you have at that particular time because things can change daily even in a small operation.” But you can always go back to the plan.
The message is stick to it. Hammell has some tips as to how. Write it down. And while it’s easy to get caught up in the day-to-day activities of farming work, timely discussions and at least an annual review will help keep things in perspective. On a growing or expanding operation, reviews can happen quarterly or semi-annually. Have structured meetings with all decision-makers and communicate your intentions with all involved, including your bank, lawyers and accountants.
With a plan, setbacks don’t become failures, just detours. Going back to the plan allows you to start again at whatever point you’re at and work toward the goals you’ve established.
The experts agree planning is cyclical. Executing the plan is, put simply, doing the things you’ve determined are necessary to achieve your goals, measuring the success of those actions and then — yes — planning some more.CG
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“ There are measurable differences in return on investment from having a plan in your head or having it written down .”
— Bob Tosh
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“ The biggest issue here is, what is the definition of success?”
— Amanda Hammell
