Hard Work Doesn't Always Equal Success
You probably grew up with your parents telling you, “In order to be successful, you must work hard.” I know that was what my dad told me every time I tried to get out of doing my chores. Hard work probably did equal success for our parents, but I’m not so sure that is the case anymore, especially for farm families.
Don’t get me wrong, I still think hard work is important and without it, most farms would fail. But, there are a whole load of factors that make a farm successful today in addition to “hard work”.
Marketing is probably one of the most important skills any producer can possess. As an agricultural lender, we see a lot of folks that keep waiting to hit the market at the perfect moment to maximize their sales. Well folks - that just doesn’t happen. You don’t know that the market has hit its peak until it goes down. The smart producer establishes his breakeven and adds his profit to that number. When the market hits that number, they sell. Granted, that is easier to do when the markets are going up, but it is an absolute necessity when the markets are going down. In today’s market, a breakeven may be the best you get. If you don’t have the time or the ability to stay on top of things, contract with a firm to do it for you.
Record Keeping and Financial Reports are at the top of the must have skills for a producer list. This typically gets pushed to the bottom of your to do list. I don’t know one farmer who decided to be a farmer/rancher because they like doing paper work and preparing financial statements. However, this is the fastest way to know if you are successful or not. You think you know how much it is costing you to raise your crop or livestock, but I predict most producers are off by at least 50%. Are you including costs for land, labor, equipment, insurance, taxes, etc.? Most producers begin and end their expenses at input costs. Lenders expect you to know your business and where you stand financially, and they expect and need complete information. Agricultural lenders know what is going on in the markets and realize your income is down over previous years, but they need historical information to show your operation was profitable when times were good. Providing a production trend report can answer a lot of questions for your lender, but rarely are they provided. If you provide your lender with acres planted by crop, yield achieved and price obtained, they can see why your income was up or down in a given year. Just like with marketing, if you don’t have the time or ability to keep good records, hire someone to do it for you. Poor financial record keeping will cost you more in the long run, and could mean higher interest rates and lost opportunities.
Human Resource Skills are quickly rising to the top of the desired skills list. All you have to do is look at the headlines to see the nightmares that are happening in corporate America with the #MeToo movement. Think this is an issue just for corporate America? Think again. If you have employees, this could happen to you just as easily. The only person to witness inappropriate behavior in the barn is the cows and they aren’t talking. Correctly documenting migrant labor is another hot button that can have big impacts if not handled correctly. Let’s not forget worker’s compensation and liability insurance issues if someone is injured.
Vision and Restraint or lack thereof, can often be the tipping point with a lot of operations. Knowing when to expand and when to stop buying can have a major impact on your operation. If you listen to equipment dealers, there is never a better time to buy than today, but we all know what a love for all things shiny and new can do to your bottom line. The ability to look ahead to what might be coming down the pipes next year could help you prepare for the unexpected.
I could go on and on with this list, but you get the picture. There is a long list of skills that a successful producer needs in addition to being a hard worker. So the next time someone tells you that you only work in the spring and fall, tell them about all of the other hats that you wear, and then ask them, “When was the last time you worked a 20 hour day?”
Kathy Daily is a Senior Vice President of First Financial Bank, and is in charge of the Bank’s Farm and Ranch Division. Mrs. Daily has been an agricultural lender for over 29 years. Contact her by phone at 888-398-4119 or by email at [email protected].