With the ever-increasing importance of farming—and the unique challenges that go with it—farm financial management and decision making has never been more important.
Actor, cowboy, and newspaper columnist Will Rogers once said, “The farmer has to be an optimist or he wouldn’t still be a farmer.” It’s a sentiment that’s as true today as it was during Rogers’ lifetime in the first half of the 1900s. It seems that farming gets tougher and tougher every year, and a growing world population that’s forecast to increase food demand anywhere from 59% to 98% by 2050 only adds greater responsibility to the job. With the pressures and demands of the industry, we at AgAmerica wondered how the nation’s growers and producers go about making farm financial management decisions. We surveyed growers from across the nation and published a whitepaper, Decision-Making Success: Making Smart Financial Management Decisions for Your Farm. Read a summary of it below, and find a link to the full paper.
The Decision-Making Process
AgAmerica Lending Co-Owner and SVP, Bryce Philpot, shared that farmers need to identify those factors they do have control over and focus on those.
“It’s smart to pro-actively manage risks,” Philpot said. “While there are numerous variables farmers can’t control like the weather, commodity prices, disease, and pests, instead think about the variables you can control: contracts, crop insurance, your planting mix, machinery and scheduled repairs. We believe this to be true: you really can’t underestimate the power of planning.”
According to Florida A&M researchers, an effective decision-making process would follow these steps:
- Setting goals.
- Recognizing the problem.
- Obtaining information.
- Considering alternatives.
- Making the decision.
- Taking action.
- Accepting responsibility.
- Evaluating the decision.
In our survey, growers maintained that setting goals, recognizing the problem, and considering alternatives were the greatest hindrance to the decision-making process.
Finding Help with Farm Financial Management Decisions
Our survey focused a great deal on who growers turned to for assistance with their farm financing decisions. They others could be individuals within the operation or those outside, such as family, business attorneys, accountants, banking professionals, ag retailers/equipment dealers, and other trusted growers. Our survey showed:
- 34.6% of respondents said the farm owners conduct research for decision making by themselves.
- 24.9% said they seek out people inside and outside of the operation to provide input or perspective for key financial decisions.
- 22.7% said the owners limit the research to key members of the business but don’t include people outside of the business in the process.
AgAmerica Lending President and CEO, Brian Philpot, advised “When considering alternatives, be open to the advice and guidance outside experts can offer.” Financial experts, like the AgAmerica Lending team, have a wealth of experience and expertise to pass along. “At AgAmerica, we encourage potential new clients to let us take an initial look into their financials,” Philpot explained. “Allow us to show you some options, show you what we can do, how we can help, and what our programs can offer. Oftentimes, our team will have ideas and solutions you may not have thought of before.”
Find the complete white paper at the end of this blog and explore the full statistics, and an interesting trend involving gender and decision making.
Relying on a Business Plan
One trend the survey revealed was how the use of a business plan could guide growers through tough, stressful choices. More than 83% of respondents agreed that having a clear business plan that included goals and the steps to achieve those goals would improve the chances of those goals becoming a reality. The same number increased to over 90% for those operations with over 1,000 acres, suggesting that such planning is necessary to successfully run these large operations and also that having a business plan can help growers expand to such a large operation.
However, only 39% responded that they have a formal business plan, even when a business plan can help in other ways, such as for securing a loan. “We’re more comfortable lending a farmer money if they have a well-written and carefully thought-through business plan in place,” said Jackie Toenes, Chief Credit Officer of AgAmerica Lending. “Seeing that the farm has a plan gives us more confidence in that business and helps mitigate our risk as the lender.”
Looking for help with your decision making when it comes to your agribusinesses financial management? Contact us and our lending team will help you with a custom-built loan solution that fits your needs. We work with ag industry professionals of all types, so we understand you and your unique financing needs.