A lot of Canadian farmers take a big picture approach to their farm’s financial health — a “money in, money out” way of thinking.
Farm management consultants say this strategy is woefully short on details, and not much help to an operator who wants to expand, reduce management stress or build a solid succession plan and it just doesn’t have to be that way, says Eric Olson.
A farmer-turned-banker-turned-farm business consultant, Manitoba-based Olson leads MNP’s farm consulting group. He thinks proper strategic planning fell victim to strong markets that alleviated the need for more granular examinations of overall farm performance.
So, while many farmers can comfortably talk about gross margins (gross income minus input, seed and insurance), they might waffle on the numbers linked to the nitty gritty costs of production. A farmer might be up to date on commodity prices and contracts, for example, but rarely take a hard look at viable ways to improve profits or cut costs.
“Farmers could all benefit from knowing more information about what it costs to run their businesses,” says Olson. His starting point? Key performance indicators (KPIs).
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