Strengthening Your Farm’s Financial Foundation

Running a successful farming business is no small task. In a recent article, Raylene Nickel offers some advice for increasing your financial strength and profitability.

To start off, it’s important to develop a realistic picture of the efficiency of your current operations. Consider income streams, where you’re spending money, interest costs, living expenses, debt load, and structure. Use this information to determine the root cause of tight cash flow and low profitability.

Once you’ve analyzed your operations, consider one or more of the following strategies for reducing debt and/or increasing revenue:

1. Invest in New Machinery – Take a look at your operations and determine if implementing new equipment could increase your revenue. Be sure to consider both buying and leasing as options for acquiring new machinery.
2. Analyze on a Smaller Scale – Analyze your operations field by field to determine if a particular tract of land might be the source of your farm’s inefficiencies.
3. Perform a Crop-By-Crop Analysis – Also, analyze the various crops you cultivate in order to discover from where the highest and lowest profits are coming.  Consider if alternate uses, such as leasing out some land to livestock producers rather than growing relatively inefficient crops, could be a good option for you.
4. Evaluate Your Family Living Costs – Look at your family’s outlay for living expenses and consider where you could make some cuts in order to devote more cash to other areas, such as paying down debt.

Nickel closes with a quick comment about a strategy that many farmers are turning to: collaborating with their neighbors. Spreading the cost of machinery and other overhead expenses between multiple farms is certainly a viable option for farmers seeking to build a stronger financial foundation.

For more details, read the article in full at Successful Farming.