Reviewing the farm business

Most of you will have a farm business plan of some description either in your head, jotted down maybe in a piecemeal way or formally written in consultation with a rural professional. No matter what form your plan takes, an important requirement is regular reviewing and updating. By Dr Ken Geenty

In Business7 Minutes

It’s often a good idea to stop and think constructively about the structure and performance of your farming business. Included will be some honest self-analysis and a re-think of where you are heading and how well you’re doing. This ‘thinking’ time will be well spent and many of the ideas may apply equally to your wider life.

Sometimes there is benefit in going through different parts of this process with family members and co-workers or as a farmer group with a professional facilitator. Having done some homework beforehand, the sharing and debating of ideas can be invaluable. If there are business sensitivities among participants a good facilitator will handle these in the best interests of all.

Swot and smart goals

Some well known analytical and planning tools include strengths, weaknesses, opportunities and threats (SWOT) analysis and setting of specific, measurable, attainable, relevant and time-based (SMART) goals outlined below and circles of control and concern illustrated (right). These back to basics tools may identify new inputs or improvements to your existing farming plan. Thought should also be given to the sustainability of your farming operation and effective monitoring of progress.

Use of SWOT analysis can give an honest self-evaluation in the context of your farming endeavors and identify where remedial or constructive actions should be taken.

Strengths. The strengths of you personally and of your wider team and farm system should be fully exploited. For example you as farm owner may be better standing back with an overview of operations whereas one of your senior staff may competently organize day-to-day farm activities. If your farm has varying breeding and finishing areas maybe a review of sheep and cattle numbers could mean built in flexibility according to management capabilities and market trends.

Weaknesses. If there are difficulties with particular technologies or the likes of financial management, consulting with specialists may be the answer. Sometimes there is a barrier due to pride in seeking help but it is important to overcome this. An outside point of view can often spark new energy and direction.

Opportunities. As well as new or modified farming options derived to overcome identified weaknesses, thought should be given to possible diversification. For example honey production or non-farming activities related to tourism. An open mind is needed, with recognition of appropriate strengths and capabilities, to transform new ideas into successful realities.

Threats. These mainly come from areas beyond your control such as market swings, weather irregularities, political restraint or regulations etc. Rather than worry about possible occurrence your emphasis should be on risk management. In other words being prepared for the worst. Some of the associated strategies may include flexibility in livestock policies to combat market shifts, building of feed reserves in the paddock, hay barn or silage pit in case of drought, and a ‘thick-skinned’ but proactive response to stifling regulatory control.

A key part of your farm business plan will be the setting of effective SMART goals which should meet the listed criteria. An example could be to set a goal of improving your lamb tailing percentage from 123% to 138% over the next five years. This goal meets the criteria of being specific, measurable, achievable, relevant and time-bound. Achievement of this and your other goals should be closely monitored with an annual review and new strategies developed to overcome any under-achievement. Sometimes progress with your goals may be expressed in your business plan in the form of key performance indicators.

A very important, and indeed critical basis for survival and growth of your farming operation is sustainability. Evaluation of this will be through the three pillars of sustainability:

  • Economic
  • Environmental
  • Social

Economic sustainability naturally relates to your bottom line, ideally showing a healthy profit margin each year. The environmental and social requirements are not so clear cut. In simple terms, the environmental requirement is often stated as a desire to leave the land in better shape than currently for the next generation. This may mean improved biodiversity, perhaps with QEII covenants, and attention to improved greenhouse gas balances across your farm. Social sustainability relates to nurturing of farm communities through development of joint activities relating to leisure, farm discussion groups, sharing of ideas on regulatory or political events and sporting pursuits.

Probably the most beneficial aspect of developing a strong and focused farm plan, in whatever form, is the probability it will give you a stronger feeling of control. And this will improve your confidence by expanding your circle of control relative to the circle of concern as shown by scenario A above.

Some focused and constructive thinking along the lines suggested here can be worth their weight in gold, particularly if the ideas are effectively embedded in your farm plans.

For guidance on preparing a farm business plan, Google ‘farm business plan template nz’ where you will find several options to start or improve your existing farm plans.

  • Ken Geenty is a primary industries consultant.