Continuously Improving Series - Improving today for tomorrow's growth
When I am working with the most successful farm business families, there are some clear areas they seem to focus their efforts. They understand the critical balance of work on the business and with working in the business. In preparing for this five-part series on how farmers today are “Continuously Improving” one area that I kept coming back too was the commitment to take the time to run their farm as a business.
Now, I am all too aware of how difficult it is to look too far ahead on the business side – we are clouded by the days work, or with our heads down working, we just can’t seem to be proactive but rather reactive daily to the needs of the farm and business. We have all been there. We have good intentions on some of the things we want to get to, but never seem to have the time or resources to get there. That was the fact in my family business, things would happen like the tractor wouldn’t start (even after you spent the time to plug it in in minus 30-degree weather) then you are rushing to feed the cattle and the entire day you spent from behind, never getting head of the things on our mind from the night before. And those are the important things that matter.
Farms today have so many areas of innovation at their fingertips to improve how we use our time – we can have the robots milk the cows while we are mixing feed, or cleaning up the manure pile, or working on herd health. We can put the tractor on autosteer, while we are searching our phone for the bank managers phone number – because we need to see if we can get the money to buy the next farm. There is often a resistance to this innovation with some generations, but our young farmers today are quick to learn and anxious to see these innovations enter their own family farm business.
Too often are both generations conflicted about adopting change. My father’s generation would wear many hats - they were jack of all trades and master of none. In todays world, we have access to specialists, many are focused to know their unique ability and that’s all they do. The generation of leaders we are seeing today rising in the farm community have realized they can either spend 2 days messing around and trying to learn a skill to use once a year (fixing the tractor tractor) or they could simply keep doing what they do best and hire someone to do this job for a fraction of the time.
Todays next generation of farmers is much more comfortable farming out these seldom needed trades and focusing their efforts on what they do best, to create leverage of their time and skills. It’s clear when we review the financial success of these farm families that embrace this culture - they are making money, they know what part of their business is most profitable and they ensure that is where they focus their time and efforts. Everything else is “farmed out”.
A good example of this is a young dairy farmer that immigrated here about 7 years from Holland. When I visited his farm and him asked to tell me about his operation, he said “I know how to milk and milk cows and that’s it”. His farm is only 100 acres but milking 500 cows in a sophisticated (robot) set-up. They do not grow feed or animals, he buys in his replacements and sells anything that calves there. They raise no young stock. He once told me “I never was good in the field. There are so many others who are better at growing crops than I am. I don’t have time to spend on raising calves. We are a milk farm.”
At first glance, you would assume that would be an expensive way to farm, buying all your inputs. But he had it down to a penny the difference in time and costs raising the next gen dairy cow versus buying the one you want when you need her. His dairy is more profitable because of the focus he gives to the cows and what the focus he puts on the outcome he is trying to achieve – quantity of production “Making milk”.
We have all heard the next generation wants to work smarter not harder. I have experienced parents that feel it means they are lazy or trying to take short cuts. So many of us think we need to put more hours in to get more profit or revenue out, but that not always the case. If we think more along the lines of “what point is my time and money maximized in my operation?” Or “what is the best use of my money in the business?” “How can I get the biggest return on the dollars I reinvest in the business?”
When we are at conferences and industry learning events, I am pleased to see so many young people with an appetite to learn. They want to take knowledge back to their family farm. They want to be better and its encouraging to see their hunger for education.
We need to empower this with acknowledgment. It may be a way to bridge some communication gaps. Maybe we should share how we went to meetings like junior farmers or 4-H to meet other young farmers with similar challenges (parents that were controlling) and ended up enjoying the educational aspect and resources offered.
A simple exercise to consider is to list what are all the jobs that need to be done in a day or in the week?
Choose an average day “in the business” mix feed, feed calves, feed cows, clean out calf barn, clean out cow barn, feed yearlings, milk cows…. Then think of your other role “on the business”: meeting with bank manager, review financials with accountant, meet with neighbour about contract for their land for next 5 years or ability to purchase in the future?
Then attach a rate to them and then prioritize them. Take a hard look and see if there are roles that someone else could do? (feed the calves) that would free up time for you to focus on the priorities. Think to yourself what is the most important thing in your business today? To contact bank manager to see of we can re-negotiate the terms of our loans (amortize over a longer period so we can cash flow new farm purchase? (interest rate negotiation).
The next step is to shift your focus on revenue. Evaluate what does your greatest revenue stream profit generate you? (i.e. making milk? $500/hr) What is your unique ability? I’m the only one that can sell the commodity? Run a certain piece of equipment? What is that role worth? “combining corn” $350/hr – could someone be picking up a $20-25/hr job that would allow you to focus on what your do best?
At the end of the day, there are countless jobs to be done on the family farm daily and it is a challenge to find balance on how you spend your time in and on the business. There are a number of ways we can utilize new innovative ways to farm, or find ways to prioritize our days better. But a simple place to start is to focus on what we are best at and consider the value of utilizing others in areas of our weakness to create some efficiencies. We could think differently on where and how to spend our time.
