Challenges of Business Planning
January 12, 2018
Featured Guest Writer: Dr. David Kohl
In a recent conference with young and beginning producers, one early morning breakout session focused on business planning, and included many participants who had previously completed the process. Posed to those who had already navigated business planning, one participant asked about the challenges of business planning as well as the best ways to address issues when presented.
Several participants indicated that the business planning process, at times, heightened tensions and was uncomfortable. This is not completely surprising as the process requires spouses, partners, parents and grandparents to address critical questions concerning goals and future direction. While these tensions can be quite challenging, almost all of the participants stated that the short-term discomfort was worth the long-term gain of generating a clear path and increased transparency for all those involved. However, for two participants, the uncomfortable questions demonstrated that aligning family interests was not the best option. Of course, this information is also extremely useful and timely before equity is deployed and commitments are made.
One participant jokingly commented that business planning, and financial projections in particular, are like tossing darts at a board. It is true that projections can be intimidating, especially for starting producers who have little production history or market experience. Yet there is a simple answer to this seeming dilemma: scenario planning. In developing estimates, one can look to another operation of similar size and scope to benchmark the numbers. Of course, the goal here is not perfection, but rather a good idea of financial projections, which are helpful no matter how long one has been farming.
For many, tractor time is easy, but office time is more difficult. As an analogy, practice time in sports can be tedious, and requires commitment and discipline. Yet it is the challenge of this time that yields results on game day. Office time is no different. While a difficult commitment, behind-the-scenes work is what maximizes the productivity, efficiency and profitability of the “go-time.”
With so many options and choices, prioritizing time and resources was one of the major challenges expressed by many. But planning compels one to prioritize the elements of most importance to the business, family and personal life. In other words, prioritizing requires an acute focus that is one of the main benefits of planning, and that yields rewards again and again.
Finally, one strategy for tackling daunting tasks is to change perspective, or approach it from the other end. Instead of allowing the work of business planning to derail its progress, envision the benefits of increased transparency, an estimation of financial outcomes, more efficient and productive operations, prioritized goals, and an acute focus. Make the challenges of business planning work for you instead of the other way around.
Please send your remarks to BMC@northwestfcs.com. I would like to know what you are thinking.
Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8 million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA, and regulators, as well as producer and agribusiness groups. He has published four books and over 1,300 articles on financial and business-related topics in journals, extension, and other popular publications.
© Northwest Farm Credit Services 2018