COVID-19 has a lot of farmers dusting off their risk management strategies, but if a business plan isn’t part of that, you’re likely sacrificing your bottom line — and your peace of mind.
“We know that farmers are very stressed, but we also know that business planning can help,” said Heather Watson, executive director of Farm Management Canada.
“The farmers who do have and follow a written business plan are able to sleep at night. They’re able to manage under greater amounts of stress because they have an idea of where they’re going.”
That’s especially true now with global upheaval disrupting supply chains and markets, Watson said at the virtual Ag in Motion conference in mid-July.
“If there’s any silver lining to all of this, it’s perhaps a greater appreciation for the farms that were ready to turn on a dime,” she said. “They’re seeing opportunity, whereas others are struggling to survive. I would hope that the situation we find ourselves in today is an indication that we need to invest in business management practices.”
Canada’s top farmers have already done that and are reaping the rewards, she added.
“Adopting business practices like planning has been proven to increase profitability,” she said, citing her organization’s recently updated Dollars and Sense study. “The difference between the bottom performing farms and the top performing farms was measured at 525 per cent — another very good reason to invest in business planning.”
Those with written business plans are more likely employing other best management practices, including record-keeping, budgeting, benchmarking, and training.
Still, only 21 per cent of farms surveyed by Farm Management Canada indicated they’re regularly following a business plan, while 48 per cent said they rarely or never do. Adoption rates for other business practices have also gone down in recent years.
“A lot of times we’ll see that farmers turn to business practices when times get tough,” said Watson. “It’s been relatively good for farmers the last five years, but now a switch has flipped.”
No one can say how the pandemic will play out, but business planning isn’t about “predicting the future.”
“It means preparing for whatever may happen — looking at the risks and opportunities out there and how you can position yourself to respond to them,” said Watson.
“So no matter what happens, you’ve got some sort of guiding path to get you through the good times, the bad times, and everything in between.
“It can be your trusty sidekick when stress runs high and times get tough and decision-making might become clouded.”
Planning for known risks can help prepare for those “you don’t see coming,” said Rob Hannam, president of Synthesis Agri-Food Network.
“We’re much better prepared as business owners and managers to respond because we’ve got a bunch of potential solutions already figured out,” said Hannam, who also spoke at Ag in Motion. “That act of planning really makes us better prepared.”
He pointed to companies that had already developed an online component to their business.
“They were much better prepared to respond when COVID occurred, and some have taken advantage of that, building market share or lowering their cost of doing business by moving to more online systems,” he said.
“Some businesses are taking advantage of those opportunities, and farms can do that, too.”
But farmers tend to think that, since they’re succeeding without a plan, there’s no point in investing in one.
“Are you really succeeding? In what way? And could you be more successful with a business plan?” asked Watson.
“We all know we do better with goals — you manage what you measure,” added Hannam. “The activity of planning is gold. Every farm business can do that.”
But it needs to be part of “your everyday activities so that it comes to mind more often,” said Watson.
“It’s not something you pay an adviser to do and then it sits on the shelf. It’s something you’ve come together as a farm team to decide what you want your future to look like.
“Your plan can provide that road map to success.”