While the combination of climatic and economic factors are challenging farmers, this downturn is nothing new in farming and is an opportunity to put plans in place to build success in subsequent years.
This was the message Waikato-based farmer and farm consultant Rob Macnab gave farmers on the fourth of Beef + Lamb New Zealand’s Sow, Grow, Thrive; empowering farmers for financial success webinar series.
Talking to the theme of farming through the seasons; mastering cycles with financial insights, Macnab talked about the cyclical nature of farming with good and challenging seasons.
Plan, plan and plan again
Echoing speakers on the three previous webinars, Macnab stressed the importance of putting plans in place to work through this cycle.
“It is critical in times of climatic stress, but also when the business is facing an economic challenge.”
He says now is the easiest time to build plans because farmers will have clarity about where they are heading and what they want to achieve.
Rather than being overwhelmed by the current set of circumstances, Macnab said it was useful to break it down into manageable actions and solutions.
“It’s about eating the elephant one bite at a time.”
When writing plans, he says specificity and clarity was important. For example, having debt servicing at 15 percent of farm income in five years. Being specific will ensure the right information is sourced to make it happen.
Plans could include many aspects of the business such as sub-division, stock policies and income streams.
Understand the business
He says this season’s situation is nothing new to farming, what is different is an individual’s perception, experience and knowledge.
Knowledge means understanding the farm business and knowing where its strengths and weaknesses lie. This in itself will help throw up solutions.
Having key measures, such as bank balances, that can be accessed quickly and efficiently ensures farmers have factual and accurate information to underpin their decision-making.
Mr Macnab says it was important to know when outside expertise was required.
“Be aware of your situation and when support is needed to fill the skill gap.”
He urged farmers who had not experienced this type of downturn, to look at their circle of friends, family or advisors to find someone who has been through this before and tap into their knowledge – and use their own knowledge of the farm.
Building a team
The key to a successful farm business is having a team of people working towards a common goal.
“Get people who challenge you and make you feel uncomfortable, as long as they want to make the current situation better,” he says.
When building a team, it is important to build the knowledge base and fill any knowledge gaps.
In farming there are a lot of gaps. This would include intricacies of different financial products, forages and animal health solutions.
“Farmers should have a good working knowledge of all of these but may not necessarily have the expertise, and that’s where you need to fill the gap.”
Be your own expert
Farmers need to know their business better than anyone else.
This means knowing the numbers, mastering the balance sheets, knowing docking percentages, farm working expenses as a percentage of gross farm income, kilograms of product produced per hectare and income per hectare.
Macnab says their very good farm business packages available (Farm Focus, Xero, Figured) which can generate all this information at the push of a button.
Benchmarking is another valuable business monitoring tool whether it be internally or against others of a similar farm type and land class. He recommended using B+LNZ's Benchmarking Tool.
Take action
Farmers shouldn’t be afraid to test themselves and try new things within their business.
“Review the outcome against what you thought was going to happen. Be honest about what works and what doesn’t work in your situation.”
Celebrate success
Macnab says farmers are typically not good at celebrating success, but it was important to take the time to recognise when progress has been made and success achieved.
“Celebrate along the way and not at the perceived end because there is often no end point in farming.”
Take time to reflect
After this cycle has passed, Macnab recommends taking the time to reflect, work out what went well and what didn’t and store that knowledge away for next time.
As sure as eggs it will happen again. Never let a good crisis go to waste.
To listen to the webinar go to Farming through the seasons: mastering cycles with financial insights with Rob Macnab