January 18, 2022

Frye: Questions to ask before growing the farm

Farming certainly is a competitive business, perhaps now even more than ever. To maintain a competitive edge, farm leaders often consider ways to grow or expand their operation.

There could be any number of ideas, opportunities or reasons that prompt the desire to grow the farm. But first, it’s important to ask whether it’s the right time to grow.

Ask These Three

Here are three questions to get clear on as a leader, or leadership team, before entering into a growth or expansion opportunity.

1. Why do we want to do this? This question is important to ask in two different ways. First, ask it about the drive or desire to expand the farm in general: Why do we want to make our operation bigger in some way right now? Many have found that growth for the sake of growth often becomes harder to sustain in the long-term. Also, ask it in terms of the particular growth opportunity that you’re considering, for example: Why this particular opportunity — piece of land, side business and so forth — and not something else?

2. Do we know and understand how this opportunity fits in financially with our current business? Answering this question involves first getting the numbers, projections and financial data to show how the growth opportunity will drive profit to the bottom line of your operation, since that’s what business is all about. Will this new business opportunity stand on its own from the beginning, or not? If you’re buying new ground, will the number of acres add in new efficiencies to the operation with regard to current equipment or will it require new machinery purchases — and additional capital? A feasibility study looking at the new ground in light of your current operation can be helpful and give you more data for decision-making.

3. Have we considered ways to diversify our operation? Not all farm growth has to involve adding acres. Sometimes, adding a side business, whether ag-related or not, can be a good way to diversify and reduce the risk associated with being involved in a single business sector. Your operation might have opportunities to grow specialty crops or to contract with buyers to grow to their specifications for a premium. Such opportunities can involve moving away from familiar facets of grain farming — your operation’s current zone of expertise — so consider carefully before deciding whether that’s right for your operation.

Four Mindsets

The number of decisions a leader must make can often be a bit overwhelming and might lead to “decision fatigue.” What are some of the best attributes, approaches and mindsets that can help when challenge and uncertainty are involved?

1. Numbers-driven. The farmers who run their operations by the numbers tend to have more clarity and peace of mind when they make decisions in uncertain situations. They use data, projections, metrics and other financial information and that often helps take some of the emotion out of the decision-making process.

2. Adaptable. Taking a mindset of flexibility and adaptability helps the farm leader be more responsive to changing conditions, scenarios or situations both within their operation and the factors outside of it that impact their operation. The more quickly a farm leader and operation can adapt, the better advantage they often have.

3. Forward-looking. Running the operation with an eye to what’s coming up next and working to anticipate is an important mindset to work on. These farmers practice thinking about the future and the implications for their farms. They try to stay one step ahead in their thinking and that can help keep their farms competitive.

4. A learner. Farm leaders who take a mindset that they can always continue learning something new also typically have a competitive advantage over others. They seek out new ideas and new ways of doing things with an eye to determining whether those ideas are a good fit for their operation.

Leaders of growing, dynamic farm operations often say they would like to be more strategic in the creation of marketing plans and in making marketing decisions.

Our market advisers come alongside farmers in that process. Get in touch for more information or get a free two-week trial of our marketing information service at www.waterstreetconsulting.com.

Darren Frye

Darren Frye

Darren Frye is president and CEO of Water Street Solutions.