Survival Tips for Todays Family Farm

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Survival Tips for Todays Family Farm

• Dr. Alex White
• Agricultural Applied Economics
• Virginia Tech
• axwhite_at_vt.edu
• 540-231-3132

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What Does It Take?

• Long-term planning
• Financial management skills
• Flexibility
• Creative thinking
• Inputs, asset control, production, etc.
• Marketing, finance
• Problem solving
• Risk management
• Contingency planning

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A Written Plan for the Future

• Manage for the future, not just for today
• Long-term thinking
• Set goals for your business AND your family
• Plan for the continuity of your business
• Transition planning
• Estate planning
• The earlier you start, the more tools you will
  have available

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Business Planning

• Have a written plan
• Contact VCE for guidance and assistance
• Include all parties in the planning process
• Spouse, children, labor, suppliers, etc.
• Why?
• Organize your thoughts
• Obtain capital (lenders, investors)
• See how all parts of your business interact
• Helps you plan for the future make decisions
• Continuity of your operation WITHOUT you
• Contingency plans and options

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Business Planning

• Not a once and done project
• Treat your business plan as a living document
• Revise, update, change as needed
• Beware Dont overplan!
• A good plan, violently executed now, is better
  than a perfect plan next week.
• Gen. George S. Patton

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Solid Financial Management Skills

• Business
• Cash flow liquidity
• Helps you weather the storm (short term)
• Cost control
• Focus on your major expenses
• Debt management
• Debt level, repayment plan, equity vs debt
• Efficient use of assets
• Idle or under-used assets, asset fixity
• Profitability
• Crucial for long-term success

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Solid Financial Management Skills

• Household
• Consumer spending
• A leading cause of farm financial problems!
• Consumer debt
• Keep consumer PI payments under 10 of income
• Cash reserves
• Aim for 3-6 months of living expenses
• Insurance coverage (possibly from off-farm job?)
• Health, disability, life, P/C, liability,
  umbrella, LTC
• Estate planning
• Titling of property, gifting, trusts, POA, AMD,
  wills

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Flexibility

• Be able to react quickly and appropriately
• Asset control
• Buy vs lease vs borrow vs do without
• Production systems
• Try not to lock yourself in long term
• Can you change with the times?
• Marketing
• Be able to react to changing markets
• Lead the market be proactive

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Marketing

• Crucially important to your business!!
• Know your market
• Who is your typical customer?
• Build customer profiles for each market segment
• How big is your market? - operating radius?
• How can you best reach your market?
• What is your competition doing?
• Is direct marketing going to save your operation?
• Think creatively and LISTEN to your customers!!

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Creative Alliances

• Effective partnerships throughout the entire
  business channel
• Inputs and supplies
• Production
• Transportation
• Processing
• Marketing
• Financing
• Insurance coverages, etc.

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Leverage Your Strengths

• Build on what you do well
• Exploit your strengths
• Consulting, hire out your services
• Off-farm or auxiliary income
• Work to improve/minimize your weaknesses
• Education
• Hiring practices
• Use of technology
• Alternative enterprises, etc.

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Risk Management

• Know your risk exposure do a risk inventory
• What are your main risks?
• How can you manage those risks?
• Insurances are you adequately covered?
• Liability, health, disability, life, P/C,
  umbrella, LTC
• Self-insure pay out of your pocket
• Do you have the financial reserves on hand?
• Risk minimization and risk avoidance

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Contingency Planning

• To me, the sign of a good manager!
• Thinking ahead rather than reacting
• Fall-back positions
• Escape plans
• Alternative uses of assets
• Alternative markets, suppliers, resources, etc.
• Babe Ruth Rule (3)

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Creativity Open-Mindedness

• Look for new/different ways to do things
• Talk to your customers, suppliers, processors,
  competitors, neighbors
• Teamwork
• Stay in touch, stay current
• LISTEN, LISTEN, LISTEN!!
• Dont be afraid to try new things
• Dont be afraid to get rid of unprofitable
  enterprises culling mentality

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In Summary

• Develop a written business plan
• Hone your financial management skills
• Household as well as business!!
• Be flexible and creative
• Spend time on your marketing
• Becoming more crucial with time
• Manage your risks
• Contingency planning helps you see options