The Farmer’s Office: Tools, Tips and Templates to Successfully Manage a Growing Farm Business
By Julia Shanks
New Society Publishers / 288 pages / $24.95
Launching, growing, pivoting and stabilizing your farm business all share one essential ingredient: a solid financial road map. Understanding what makes you money (and conversely, what does not) helps you focus on how to maximize profitability while developing informed strategies for growth.
Julia Shanks, author of The Farmer’s Office: Tools, Tips and Templates to Successfully Manage a Growing Farm Business, writes that “the only way to make informed decisions about your business is to have a solid grasp of the numbers. And to have a solid grasp of the numbers, you need a basic understanding of accounting and a solid bookkeeping system.”
Starting the book by addressing the question she gets asked most frequently — why bother going through all the hassle of detailed bookkeeping and accounting exercises? — she moves into an introduction to key financial statements and basic accounting principles, walks us through how to plan for and finance a new venture, and, perhaps most helpful of all, how to get yourself out of a hole should you find yourself in a tenuous financial position.
While most of the real-life examples showcased in the book have to do with vegetable production or small mixed farms that sell to wholesalers, farmers markets and CSAs, the book is nonetheless an easy and valuable read for all farm managers (particularly for those starting out), offering immediately actionable steps and lots of templates and how-to videos.
Shanks delves into why it’s important to develop a business plan and shows readers how to make one. Recognizing that any venture “takes money to make money,” she highlights the pros and cons of the four financing options as well as the do’s and don’ts of presenting to investors.
A full two chapters explore how to set up QuickBooks, the go-to accounting software for small businesses. This includes helpful screenshots for visual learners, and how-to-use-it advice for day-to-day cash management on the farm.
“Managing cash flow isn’t difficult,” says Shanks, “but it’s a process that takes commitment and consistency. Instead of always struggling to keep up with your bills, effective management allows you to get ahead and plan for growth. A daily routine can help you avoid a cash crisis and navigate out of one if you accidentally find yourself there.”
On that note, Shanks covers the four “Rules of the Hole”: how to quit digging, how to keep the dogs at bay, how to climb out of the hole, and how to get your head out of the sand. She also provides 10 tips to help you stay out of the hole in the first place.
Shanks stresses the importance of going beyond just numbers on a spreadsheet and how to use them to dig deep to help you measure success and keep your eye on the prize. The appendix includes a sample income statement and business plan, financial projections, and a sample chart of accounts for livestock and vegetable farms.
Growing a business is synonymous with uber-strategizing and Shanks details the key steps of how to make this foundational component of business management a success — including a reminder to “figure out where your skills are best utilized and expand your team to fill in the gaps.”
Though expert advice from an accountant or knowledgeable farm business advisor is still paramount, Shanks’s upbeat and layperson’s terms approach to teaching farm financial management makes for digestible information on a topic that can be dry and heavy — or just not that interesting to many business owners who prefer the “doing” aspect of the profession.
Shanks stresses that to increase profits we have to work smarter (i.e. understanding your costs and pricing correctly) and not harder (i.e. just growing/raising more). Is a new or current business model financially sustainable? Does an upcoming opportunity make sense for your business’s current state of health or future growth goals? Will a new purchase improve efficiencies enough to increase profitability even after you repay the required loan?
“Understand whether a new opportunity makes sense and if you can afford the loans that may be needed,” says Shanks. “Then you have a map for your farm and your business plan guides you through the chaos. It allows you to be proactive, instead of reactive.”