At a recent South Dakota agricultural bankers conference at Black Hills College, a banker commented, “They’ve got the racecar, but they don’t know how to drive it!” Many of you are probably thinking this is a story about NASCAR or a racing event. No, this quote has some relevance to agriculture. This banker really made me think on this one!
How often do we see, particularly in family business transition, a situation in which the younger generation returns to a business that has been a profitable high performer for the previous generation, but it continuously fails to “finish the race” or underperforms compared to peers when the younger generation steps into the driver’s seat? Others may have a stellar set of assets, including land, livestock and equipment, but management is complacent and lacks focus, or just fails to follow through and execute. Still others continue to make the same mistakes year after year and continually blame others, such as the government, weather, suppliers, or neighbors, and place in the back of the pack concerning financial performance and outcomes.
It was a conclusion at the bankers conference that more producers, and in some cases lenders, have become complacent as a result of strong economic times. They are now being challenged, but changes in the economic cycle and competition from neighbors are causing them to fall back in the pack.
Those who have a good race in the NASCAR series are constantly discussing with their crew chief and racing teams, making adjustments as different racetracks, conditions, or competition are encountered during the race. The same can hold true for a producer’s situation.
If one has a good racecar, or even one that is challenged, a good dashboard of protocols and practices needs to be monitored. Practices such as knowing the cost production, monitoring cash budgets, comparing projected to actual results, and continually making adjustments are necessary. Having a risk management program and knowing degrees of tolerance so you can maintain economic performance between the lines in the track is imperative.
It is important to know your finances, production, labor and management performance indicators so that a competitor making outlandish bids does not cause you to veer into the wall or the pits. Having a good racecar or productive assets is very critical; however, if one puts the right team around this racecar, there is a high probability of placing quite high in the race.