The majority of farms don’t go out of business because the farmer wasn’t good at growing things. They go out of business because no one was minding the money, the depreciation schedule, or the cost of goods until it was too late. Farming today is operating a capital-intensive business and requires the financial control of any mid-sized commercial enterprise.
Cash Flow Is The First Skill That Matters
Income from agriculture comes during certain times of the year. However, expenses are spread out across the year. To run a successful farm, you need to build a 12-month cash flow forecast and regularly update it to see what the current scenario looks like. Then adapt investment or any other important financial decisions according to the same. You can’t tell if you will be able to cover your expenses with what is left after the harvest is over.
To do this, you need to have a proper accounting system in place. Define your operating accounts separately from the capital reserves. Stress-test your budget based on the expected lowest price of your commodities for the season. Finally, have enough liquidity to maintain your farm running as usual for two or three months when facing negative market fluctuations.
None of this is remotely as attractive as pulling on a new pair of leather boots or driving a gleaming new tractor off the dealer’s lot, but it is what separates the real businesses from the part-time dabblers.
Asset Management Goes Deeper Than Buying Equipment
Investing in heavy machinery and equipment is one of the most significant expenses on any farm. Unfortunately, it’s not the only price you pay – but it is an excellent place to start evaluating what a piece of equipment is really going to cost you.
Add the fuel, fluids, and filters, the regular and advanced technology services, the parts, repairs, and replacements that keep it running and, somewhere down the line, the disposal. Those are your real numbers – and they need to be the ones driving your procurement decisions. Part of that discipline means continuously monitoring the market. Watching listings for agricultural equipment for sale gives operators a live read on what quality used machinery is worth, which sharpens both replacement timing decisions and trade-in negotiations.
Preventive Maintenance Is An Operational Strategy
When you have a lot of work to do and a short season in which to do it, making time for preventive maintenance can feel like an expensive luxury. But the fact is, discovering a hydraulic leak, failing bearing, or wobbling tire early, and fixing it before it becomes a breakdown puts money in your pocket.
The maintenance needed is specific to the machine and the manufacturer’s recommendations, but there are some general guidelines that apply farm-wide. Lubrication of bearings and moving parts, changing of engine, hydraulic, and transmission oil and filters: these are basic maintenance tasks that need to be done, without guessing or skipping a year because you can’t remember the last time it was done.
A preventative maintenance program should be written for each machine. The operator’s manual is a good start and can be a complete and pretty accurate guide if faithfully followed. The number of hours worked or the acres covered are a better guide to an appropriate maintenance program than the date the machine rolled out of the factory.
Data Literacy Is Now Non-Negotiable
Precision agriculture tools such as GPS-guided machinery, soil sensors, and variable rate application systems generate lots of field data. It’s not that difficult to access that data. But knowing what to do with it is the challenge.
The operators who get value out of AgTech are the ones who take that data and use it to inform decisions. Which paddocks are underperforming given inputs? Where are you applying more or less water than the crop needs? What does the yield map tell you about variability in your soils across the property? These sorts of questions require basic analytical thinking, not a computer science degree, but a willingness to engage with numbers beyond the farm gate.
ROI needs to be the filter. Every piece of new tech needs to be put up against the question: does this pay for itself in a reasonable business time frame? If you can’t answer that question with calculations, then the decision isn’t ready to be made.
Negotiation Belongs In The Skill Set
Procuring seed, fertilizer, and chemicals in bulk necessitates negotiating with actual suppliers, placing orders with real people, and forming long-term business relationships. The farms that successfully minimize input costs generally aren’t the biggest operations. They’re the best-prepared. They’re the most organized. And they’re the most reliable in terms of timing, needing a consistent stream of product delivered on time to avoid costly bottlenecks.
For a given farm operation, no single input expense is likely to exceed the total of all others combined, but successful operation without judicious application of these inputs is impossible. Consequently, the discipline of successful negotiation is likely as important to the farm manager as the data science needed to identify optimal application rates and timing. This sets small, medium, and large operations on a fairly level footing.
That’s not to say that the skills and attributes that have always defined a successful farm manager – deeply intuitive feel for the markets, a close relationship with the land, the will and ability to work sunup to sundown – are now outdated. They’re absolutely not. It’s just that the essentials of a successful manager’s skill set must evolve.
