Most commercial businesses do it… does your farm business?

Are you thinking about the long-term future and goals of your farming business,or just bouncing from one year to the next?

• Do the decisions you make align with the long-term plan for your business?
• Is everyone in the business aligned with the direction the business needs to take?

Strategic Planning in its various forms is a very common practice for most medium-to-large commercial businesses. The owners or board usually develops the plan; they set the goals for the next 3-5 years (or longer) and agree on the steps to achieve staged goals. The progress towards the outcomes is followed, monitored and measured. Whilst this is common within the commercial business environment, how many farming businesses go through the same process?

It’s difficult to know, but I suspect it would be very few.

So, what is Strategic Planning?

A simple Google search will give numerous definitions. In a simple description, it is a process in which business leaders define their vision for their future and identify the goals and objectives of the business. This includes establishing a process and steps to realise the goal so that the business can achieve its stated vision.

Why is Strategic Planning important?

Strategic Planning is vital to ensure all the stakeholders in the business have agreed and understand where the business is heading, and all stakeholders involved have clarity of what the focus needs to be to achieve this.

This is critical in a family farming business with different generations working together. Without a plan, who knows where you are going?

• Are you all going in the same direction?
• How can you make well-structured decisions about the future of the business if the goals are not known to everyone?

Strategic Planning can also dovetail into succession planning for the business. Although succession planning is primarily about the transfer of management, control and assets from one generation to the next, the plan plays an important role. Understanding and agreeing on the business’s long-term objectives to create the position to successfully enable generational transfer in the future is critical.

What is the Strategic Planning process?

Strategic Planning sounds complicated, but really, it’s not. It is about creating the right environment for discussions to occur within the family and to follow a structured approach. A simple approach to strategic planning for a farming business is:

1. Where is your farming business and family now?
a. What are the family’s strengths, and
b. Where are the risks in your business?

2. What do you want or need your business to look like in 5-10 years’ time?
a. Do you need to build scale?
b. Do you need to cater for the next generation?
c. What do the individual family members want to do in the future – do they still want to be farming?
d. What lifestyle does each family member want?

3. Agree on the goals for the farming business.
a. This could be quite simple, for example:
‘For our farming business to be viable in the future, sustain the next generation and provide a comfortable retirement for the older generation, we need to increase our profitability by 150%. To achieve this our average annual income needs to grow from $3M to $5M in the next 10 years.’

4. Agree on how the goal will be achieved.
a. Again, for example
‘To facilitate this growth, we will increase our land area by 30% either through land acquisition or leasing and triple contracting income from $250K pa to $750K pa. To achieve our land area growth, we will actively seek out opportunities and take on those that provide an acceptable return. To increase the contracting income, we will increase advertising, seek referrals from existing clients and approach farmers who we believe would be in demand of our offering.’

Monitor the outcomes?

The best way to attack an agreed long-term strategic goal is ‘just like eating an elephant’! One bite at a time.

Break down the actions required into tasks that are required to be done each quarter.

For example,

• For one quarter, the focus could be on building the contracting client base. For that quarter, marketing and seeking referrals will be the focus.
• The next quarter the focus could be on growing the land base, so the task is to approach neighbouring farmers who may be looking to exit or lease out land in the future.

Quarterly monitoring the actions and holding the family members to account on what they need to do is vital.

How do we facilitate a Strategic Planning process?

Undertaking a Strategic Planning process in a farming business can be as simple or complicated as you want to make it. The critical thing, though, is to spend the time ‘chewing the fat’.

Talk about what the future could be, and spend the time thinking about what the farm needs to achieve from a financial perspective, and more importantly, what do the family members want to achieve in their futures within the farming business and individually, you may find ‘not everyone is as aligned as you thought!’

When was the last time the stakeholders of your family farming business got away from the distractions of the daily tasks, sat down together, and discussed what you want the family farming business to look like in 10 years?