By following six steps, farm operators and small business owners can develop a plan to chart the course for future growth and sustainability, according to Michael Langemeier, professor in Kansas State University’s Department of Agricultural Economics. In a three-part series, Langemeier shows ranchers how to successfully make plans to transition the operation, including six steps that can be beneficial for farm operations:
1. Develop an effective mission statement. “Consider what makes the operation unique, business values and what the business should be recognized for. Motivating employees and focusing efforts are two benefits of a clear mission statement,” writes Langemeier.
Although they are informal discussions, my husband Tyler and I often sit down with my parents and discuss our goals for the future. At first, our roles were somewhat undefined, but as time goes on, Tyler and I are finding our place within the business. I think it’s important for family members to know their roles and responsibilities. How do I fit? This is a question that must be answered for each member to feel valued in the business.
2. Formulate goals and objectives for the business. “This means having specific, measurable, attainable, rewarding and timed smart goals which will provide strong reference points for decision making and measuring progress,” says Langemeier.
A month after getting married in 2010, we bought a small ranch located just a half-mile from the homeplace. While we were excited to get in the cattle business, this investment took priority. So instead of buying a big group of cows right off the bat, we are focusing on reducing our land debt and getting on solid financial ground first. While I’m anxious to expand, patience is the key. I think it’s so easy for young people to get wrapped up in what our parents have, forgetting that they worked decades to get where they are. I’m learning to make smart business decisions and not get in over my head.
On that note, Langemeier adds, “It is important to have specific goals. Instead of wanting the farm to grow, specify you want the farm to grow by a certain profit or acreage each year. Measurable goals let you look back in five years and see if you grew by a set amount.”
3. Focus on firm resources. “Strengths and weaknesses reflect the internal components of the business. Contemplate human, physical, financial, technological and consumer resources. The important thing to do is think about changes that may occur in the near future that would impact your farm’s ability to compete or changes that could lead to profitable endeavors,” adds Langemeier.
Anticipating what will happen in the future is tough, and sometimes these conversations can get difficult. That’s why estate planning is so important and having open discussions with family members is critical. I think this is an area many of us struggle with. Making projections for the future and working toward those goals, even if they change over time, is a good first step.
4. Evaluate opportunities and threats in the external environment of the business. “A survey of the current and future business environment centers around competitors, markets, powers of suppliers and buyers and the operating environment. Ask such questions as, ‘What are the key factors to competitive success?’ ‘What are the industry’s dominant economic traits?’”
This is an area we really enjoy exploring. Tyler and I are always brainstorming ways to diversify the operation. While our family markets purebred Limousin bulls and females, we are interested in direct marketing to consumers and developing a branded beef program for local customers to enjoy. Since Tyler grew up helping in his family’s butcher shop, and we met on the meats judging team at South Dakota State University, we both naturally gravitate toward the retail side of the cattle business. We feel this is an area we could expand upon, adding value to our operation. We know we will never be the biggest, but we want to be the best in our niche.
5. Identify and select strategies to achieve goals and objectives set in step two. “This step requires matches to be made between strengths and opportunities outlined in steps three and four,” says Langemeier.
As I stated, it’s important to match skills, passions and talents to an appropriate role on the operation. While I focus on marketing, Tyler enjoys hands-on work like the mechanics, breeding, baling hay and feeding cattle. Dad finally has a right-hand man after years of it just being us girls to help. And, although he won’t admit it, I think he likes having a guy around to be in cahoots with!
6. Engage in continuous self-assessment and strategy refinement. Develop best practices to monitor success.
From setting goals to achieving them, it’s important to write down plans and check off successes as they come. It might be as simple as having a family business meeting once each month, or it might be more monumental like finally sitting down with an estate planner to figure out your succession plans. A family business is ever-evolving, especially as new members are introduced. And, each family is different, so I don’t think there are cookie-cutter solutions for all of us to follow.
Check out the complete news release here.
What have been some important steps your family has taken to work together on the ranch? How have you defined roles for family members? Do you hold regular family meetings? Is your transition plan in place? Share your experiences with us today!