Brenda Stefanson, PAg
Regional Farm Business Management Specialist
Saskatchewan Ministry of Agriculture, Watrous
Do you ever wonder how you, as a farm manager can ensure that your farm is financially successful over the long term?聽 A recent study shows how adopting seven practices can move your farm from low financial performance into the top 25%. In 2015, Farm Management Canada, Agri-Food Management Institute and Ipsos Ag and Animal Health conducted a study to determine whether adoption of beneficial farm management practices pays off for farmers. 鈥淭he purpose of the project was to measure the degree to which farm business practices are direct drivers of farm financial success鈥� (Dollar$ and Sense, AMI, 2015).
This study identified seven farm business management practices that can improve the farm鈥檚 financial position. In other words, farm managers employing these practices are found in the top 25% in terms of their farm鈥檚 financial performance. The project compared Canadian farms in the top 25% in financial performance to the bottom 25%. The differences are significant and reveal that the top managers realize financial benefits including:
鈥� 525% increase in Return on Assets
鈥� 155% increase in Gross Margin ratio
鈥� 100% increase in Return on Equity
鈥� 100% increase in Asset Turnover.
So what are these top managers doing that others aren鈥檛? No magic bullets here, just some habits that can be adopted by anyone. The seven farm business management practices that are employed by the top 25% of farm managers are:
1. Propensity to continually learn
2. Business decisions made with accurate financial data
3. Use of professional business advisors
4. Use of a formal business plan
5. Cost of production monitoring and use
6. Risk assessment and management
7. Use of a financial plan with budget objectives.
We will explore each of these in more detail over the next few articles. If you are interested in learning more about this study the full report,聽 Dollar$ and Sense: Measuring the Tangible Impacts of Beneficial Business Practices on Canadian Farms, July 2015, can be found at www.fmc-gac.com/publications.
If you want to get started on developing these beneficial management practices call your local Regional Farm Business Management Specialist to access resources that can help you move up into that top quartile. We can help you get started on your habit of continually learning with financial help from FBDI to cover some of the costs of training in farm business management. 聽
For more information stop by your local Regional Services office, call (306) 946-3230 or contact the Agriculture Knowledge Centre at 1-866-457-2377.
