How Farm Business Management Promotes a Strong, Innovative Sector
Insight Farm business management is critical to advancing agricultural innovation. Heather Watson shares best practices in this space.
Farming is unique from any other business and is not for the faint of heart.
While the world calls upon farmers for increased productivity, farmers are facing risk and uncertainty like never-before, from Mother Nature to changing markets and regulations, much of which is outside of their control. Public trust and social license are now putting more pressure on farmers. To remain successful, farmers must carefully balance the societal, economic and environmental impacts of farming. Farmers are not only feeding you, me, and the world; farmers are the heart of our economy, environmental stewardship, public health and community development.
While farming is driven by a passion and a love for farm life, today’s farms must run on business principles and strategies. In an ever-changing and increasingly complex global marketplace, the business-savvy farmer is positioned to confront change with confidence and seize opportunity, carving out a steady path for sustainable growth and prosperity.
Farm business management is the key to establishing a mechanism whereby thinking ahead and proactivity becomes part of everyday decision-making. It’s how farmers know where they are, where they want to be, how to get there, and what happens next. Farms investing in farm business management build the underlying capacity to weather any storm and seize every opportunity – to innovate and grow and continue to be major contributors to Canada’s economic, environmental and social development.
Through planning, farmers learn to set realistic goals. They assess the risks and opportunities they may encounter and put measures in place to mitigate and manage what is in, and outside of their control. They gain confidence by identifying potential problems before they are problems. And when the going gets tough, they have a solid plan to fall back on - their roadmap to success and trusty side-kick when stress runs high or times get tough and decision-making becomes clouded.
It is in this way that farm business management facilitates mental preparedness, helping reduce stress by reducing risk and uncertainty. Farm business management provides the means to build a solid foundation upon which farmers can take calculated risks, seize opportunity, make informed decisions and invest in what works.
Business planning facilitates important conversations about the future of the farm and everyone’s role within it, including the next generation. Planning solidifies the farm team, creating a crucial support network including family, business partners, and advisors. The business plan is the most effective tool for uniting the farm team around a vision as a guiding light to keep the farm healthy for generations to come.
Innovation can be defined as simply ‘staying relevant’, or ‘work that delivers new goodness to new customers in new markets, and does it in a way that radically improves the profitability equation,’ and finally ‘the implementation of creative ideas in order to generate value, usually through increased revenues, reduced costs or both.’
The rhetoric speaks to successful innovation as a deliverable with relevant, measurable results.
While there is opportunity, there is also risk. And farmers know this all too well. Innovation in simple terms is an opportunity to gain or lose.
Farmers must understand the benefits, the potential risks and have the capacity to adopt and manage innovation.
Sustainability speaks to the natural connection between the environment, people and economics. Sustainable growth is that which can be maintained at a certain rate or level in perpetuity. Sustainability is therefore a key consideration in the context of innovation.
Taking a strategic approach grounded in the triple-bottom-line provides the best chance for long-term, sustainable success. Expanding market opportunities, seeking out and adopting innovative practices, managing risk and environmental stewardship are only feasible when farms have the long-term capacity to succeed and there are measures in place to manage risks which may arise.
‘Capacity’ is key when it comes to considering opportunities for growth including entering into and sustaining market opportunities. Are there new opportunities for existing products? New products? What are the trade risks in the short- and long-term and how will market risk be managed? Changing and adding business processes and technologies often means evaluating human resources - labour supply and skills development and training requirements, along with the capacity of the farmer to manage new people in the workplace. This is a big step for farms, especially for those employing help for the first time.
As innovation is about finding ways to improve current practices and overcome barriers to success, innovation can also be thought of in the context of better management practices - a new way to attract and retain employees, organize senior management and manage the books. Farm business management is being redefined by technology. Farm managers are working together along with industry experts to explore new ways to manage for success using the latest and greatest business management tools – much like we see happening in production. Instead of comparing genetic varieties and farm equipment, farmers are comparing their processes for analyzing options, business and transition planning, and how to lead and empower a strong, dedicated team.
International development means Canada can no longer compete as a low-cost producer, Canada must find new ways to gain a strategic competitive advantage. Investing in farm business management is Canada’s greatest strategic advantage for managing risk, sustainable growth and competitiveness.