Business Strategy

What do you hope to accomplish with your business?

As a business owner, having set business goals gives you the power to steer your business activities in the same direction as your hopes and intentions. This forward thinking can be compared to planting a field: inexperienced farmers often focus on what is going on with the planter behind them, only to end up with a very crooked row of corn. With some coaching, an inexperienced farmer will learn to pick out a tree or a landmark in the distance that can be lined up with the tractor’s muffler. Suddenly the rows are straighter, and the young farmer is able to complete the job faster than before. Similarly, business managers need to have a clear view of the future to create a business that is in line with their strategic goals.

1. Business Planning

Your farm business needs to be prepared for all eventualities. Follow these simple steps to improve the likelihood of success of your business.

Know where you are

You cannot change your current business immediately, nor should you want to. You have done good things to get to your current position. Understanding your strengths will shape the way you move towards your business goals. Core competencies are things your business does well. Building on these can create a competitive advantage for your farm business.

Know how to get there

Having an understanding of how you are going to achieve your business goals is as important as having the goal in the first place. Sometimes it is difficult to see the steps needed to reach your business goal. Being able to see over a hill is hard to do, you know you have to get to the other side, but you are not sure exactly where you need to be on the other side. Figure out what you know or can see, evaluate whether you think it is likely to be a success, start on the path towards this goal, build in flexibility, and re-evaluate as new information about your progress toward your business goal becomes available.

Know when you’ve arrived

It is entirely possible to pass your business goals without knowing you have achieved them. Each of your goals must have at least one final action step required in order to recognize when and if you have reached your target. A business goal to improve efficiency is good, but without a defined objective, like reducing the number of labour hours per acre farmed, from one hour per acre to half an hour per acre, you will not be able to tell when you have arrived at your target. Look for that tree on the horizon! Look back only to make sure you reached all benchmarks and become aware of your strengths and weaknesses. Otherwise, focus your attention on those activities that take you from where you are toward the end you have in mind.

Know where you have been

The successes and failures of the past, give you valuable knowledge to help plan your future. Look at your successes and ask yourself “What did I do right?” Look at your failures to understand what you did wrong. Many of us are not aware of the things we do right, simply because we do not consistently evaluate past activities.

Know where you want to be

Take the time to look forward. Know whether you want to expand your business, change your focus, increase your value added activities, or make more money. You must be specific about your business goals, so that you travel in the direction you want to go.

2. Basic Strategic Approaches

  • Rapid Growth (ahead of most competitors)
  • Keep Pace with Industry
  • Defend Existing Status (strong starting position)
  • Catch Up (eventually surpass market leaders)
  • Turn Around (Underperforming Farm Operation)
  • Hang In (go with the flow and minimize effort)
  • Harvest (maximize opportunity with view to withdraw)

Deciding on a basic strategy will help define the steps and metrics required to achieve your ultimate objective.

3. Defining Success

A growing business will display many of the following characteristics:
  • Sensibly Financed (prudent mix of equity and debt)
  • Strong Cash Position (access to contingency funds)
  • Above-Average Profitability (return on capital invested)
  • Aim for Rapid Growth in Revenue (ambitious yet achievable goals)
  • Expanding Markets and/or Attractive Market Segments
  • Strong Franchise or Brand
  • Substantial Resources Devoted to Innovation (R&D, offerings or market)
  • Competes on Non-Price-Related Issues (quality, service, functionality)
  • Strong Relationship with Customers (responsive to their needs)
  • Specialist/Leadership Position (with superior offerings)
  • Well Managed (excellent staff and HR practices)
  • Focus on Success (not simply reducing likelihood of failure)

A growth-oriented business needs a cash war chest, not merely adequate debt facilities. Likewise, its management team must have the capacity to manage the present business as well as its growth.

4. Assess your Farm Business Practices

The Taking Stock workbook guides producers through a self-assessment of their current farm business management practices to identify strengths and weaknesses as well as prioritize actions to address personal and business goals. The process results in a farm action plan which is required to access program funding for consulting services. Having a better sense of your overall situation, goals and priority actions will enable you to work with advisors to better target and meet the farm’s specific needs and opportunities.

5. Other Related Resources

Advanced Agricultural Leadership Program (AALP)
Farm Credit Corporation (FCC)
Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA)
Purdue University Agricultural Economics Department
Vision and Goal Setting Workshop