Has your farm seen good years recently? Many farms are in great financial shape right now, and that’s going to be really important, especially if you’re looking ahead at what ag bankers and economists are saying.

They’re predicting that rising costs and shrinking margins are ahead for agriculture. Financial strength that you’ve built up in the good times is going to make the difference in the years ahead. Healthy working capital and equity can help open a lot of opportunities, even during a challenging time.

As we move through the growing season and into harvest, the markets continue to be top of mind for most farmers. And that’s understandable because they constantly change. There always is something new affecting the picture — demand, weather, outside markets, the global situation, the economy.

But here’s something else to think about, something that ties very closely to what’s going on in the markets and how you go about creating a plan to reduce your risk and deal with tough times: How’s the overall financial health of your operation? What are its vital statistics right now?

If you answered, ‘Great!’, then my question to you is: How do you know? Do you meet regularly with your banker, not just once a year when you’re asking for credit? Do you work with a financial adviser or consultant on a regular basis?

It’s one thing to know what’s going on with your current-year cash flow. That’s very important. But taking a step back and looking at the overall picture revealed through the numbers will give you a bigger view of what’s going on.

I often talk about the working capital and equity to asset ratios we recommend for our clients. The goal is to have 40 percent of your gross revenue available as working capital. Our benchmark for the farm’s equity to asset ratio is 60 percent to 65 percent.

Our ag finance department has been tracking these two ratios, among others. On average, farmers’ net worth in their operations has grown by $1.1 million, just in the past two years.

Right now, the balance sheet looks pretty good for most farms. Farm equity to asset ratios have risen on average from about 63.7 percent in 2011 to 65 percent in 2013.

However, many of the assets that have contributed to this increase aren’t liquid — think land, machinery, grain bins. That makes it more likely that your net worth is growing, but your cash resources remain limited, squeezing the operation during tighter times.

You can prepare now by knowing what the numbers are telling you about your operation and acting accordingly. The farms that run their business by the numbers will be the ones that will survive and thrive during what could be a down cycle in ag.

Along with that, you need to be thinking about what the growth of the farm will mean for your legacy. I recently heard about a farmer who said he had never considered his farming operation large enough to ever be exposed to estate tax.

But in recent years, his farm has grown. He’s invested in land. He and his family have built side businesses. They’ve added grain bins and tiled some ground. With rising land values and the growth of the operation, his net worth has risen substantially.

He said he’s realized he can’t keep thinking that his operation is “safe” from estate tax anymore, so he and his farming partners have decided to take action. They’ll start working with one of our legacy advisers soon to put a plan in place.

If you haven’t worried in the past about pushing through the estate tax exemption level, you need to consider what it could mean to your operation now. You’ve invested in your operation by buying land, machinery, grain bins, irrigation and making other improvements. You’ve worked to improve your business strategy and practices.

You might be closer to that exemption level than you think, possibly leaving your operation exposed to estate taxes. And when that happens, you’re hurting the future of the farm with the next generation.

They may not be able to pay those taxes without selling off assets. Sadly, selling off assets can mean a large part of their livelihood is gone.

A good legacy plan can help you be sure that doesn’t happen. Having a gradual transition — of both the assets and the management responsibilities in the operation — brings everything together and gives all the generations who are involved peace of mind.

You’ve built a farm business that you’re proud to own. Now it’s time to pay it forward with a plan to pass it — all of it — to the next generation.