In the last article, a profile of financial performance was presented for the Executive Program for Agricultural Producers (TEPAP) at Barton Creek Resort in Austin, TX. Dick Wittman, a well-recognized agricultural businesses consultant, surveyed group concerning business practices. These survey results can be useful as peer comparisons, showing which business practices some of the more elite producers are using.
Twenty-five percent of the group reported that they had developed a mission statement and defined core values. Digging deeper, 26% had written long- and short-term goals. Goal setting and establishing defined objectives are key proficiencies in managing today's businesses in an extremely volatile and uncertain environment. If there is one component of management that has top priority, goal establishment is critical when prioritizing your list of priorities.
Twenty percent had a written strategic business plan. These include strategies and actions for achieving goals. Estate and succession planning as well as discussion of business structure needs to be included.
Forty-three percent of the group had a documented history of the business. This year at TEPAP, two sessions concentrated on the importance of business history to establish and carry on the legacy of the business. This is also critical for the communications component of the business, and is particularly valuable in family business transition with either family members or other business partners.
Concerning financial management, 96% completed a balance sheet and over 60% completed an income statement on an accrual basis. Thirty-five percent calculate key financial ratios and use these ratios in decision-making.
Surprisingly, only 67% used forward contracts, hedging and options as marketing tools. While for some farms this is not applicable, it is still surprising how many producers at this level are still deficient in risk management.
Hopefully, as you think about possible improvements to your business management practices, you can use this data as peer benchmarks. Overall, commercial ag producers are improving, but as the data shows, there is always room for further improvement.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at [email protected]