Farms, and dairy farms, in particular, require constant reinvestment. But reinvestment goes far beyond just dollars and cents. It also requires personal and emotional reinvestment for each generation. Without both financial and emotional reinvestment, the farm will eventually cease.
Firms have used strategic planning in one form or another for decades. In years past, when farms were smaller and less complex, planning was fairly simple. For example, if dairymen wanted to expand, they met with their banker, shook hands, and bought more cows. It was a little more complicated than that, but probably not far off. Fast forward to today, and the farms are more complex. More family members and employees are involved, and financing is no longer done with a handshake. The stakes are higher all the way around.
Families must have confident eagerness to commit not only their money but also their time and their futures for the sake of the family farm. These are significant commitments. Motivating the family requires a compelling vision and a shared family dream to which everyone is committed. Only when these commitments are clear and in alignment can the family aggressively invest their hard-earned capital back into the business strategy.
There are many challenges in getting and keeping the alignment of emotional investment in a family farm from generation to generation. When successful, it’s seldom an accident. Deliberate planning is one key to success. It creates motivation to sustain the family farm when the inevitable personal differences and business challenges arise. Good planning and consistent execution release powerful energy the family can use to fulfill the dream of sustaining and growing a healthy family farm for the next generation.
Alignment and Commitment
While the outcome of strategic planning may be a spreadsheet, several documents and graphs, and a seven-year capital expenditure plan, the purpose of strategic planning is to build alignment and commitment for the farm’s future.
There are several tools of strategic planning, but communication is essential. Alignment and commitment are built when the owners, the next generation, and other stakeholders have their dreams, concerns, and ideas considered. We’ve found that when people’s voices are heard and considered, they will likely support the decision even if they don’t “get their way.”
Three Question Filter
There are many places to invest time and money. For example, you can expand the herd, invest in your labor force, robots or land, or invest your time in building landlord relations. The list is endless. You can also invest within the current farm or create an additional enterprise such as custom harvesting, tiling, etc.
Is there a simple framework for sorting out ideas? Yes, there is. It is The Three-Question Filter.
- What are you good at? Is it agronomy? Fixing up substandard land with tiling? Low-cost milk production? Genetics? Not only somewhat good, but what do you really excel at? When you are good at something, it’s easier and often more fun.
- What do you enjoy doing? Life is short. Spend it doing something that brings you joy.
- What can you make money at? Lasting family farms are first and foremost businesses. Money is what makes many other dreams possible, so invest wisely.
Here is an example. Our farm had swine at one point. The feeder pigs are now gone, and they will probably never return. They didn’t pass the Three Question Filter. We were fairly good at swine production, our overhead was low, and we made decent money. However, we didn’t enjoy livestock. It just wasn’t fun for anyone. It was not anyone’s passion, and no one cared when the last pig went down the road.
Any ideas or initiatives must pass all three filters to be worthy of your consideration.
It’s easy to say yes to new ideas and business expansions. Folks in agriculture know how to work. They know how to save and how to get stuff done. It’s easy to keep adding more and more. However, there are only so many hours you can invest in a new endeavor and only so much capital.
There is one more question that you can ask before committing capital, time, and energy to a new expansion or endeavor.
If we say “yes” to this new venture, what are we, or should we be saying “no” to? For example, if the dairy takes on a major expansion, what areas will get less money, less time, and less energy? Is it personal income, family vacations, or lower retirement income for the senior generation?
Strategic planning often seems threatening to farmers, and it’s completely understandable. Many think of planning as a straitjacket that constrains their instincts and limits business flexibility. The planning process also requires independently-minded owners to share decision-making with others in the company and across generations. This represents power and information that many owners would rather keep to themselves. Yet if owners want to build the family farm legacy, it takes reinvestment of energy and capital. Sharing the strategic planning process is just what’s needed.
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