By John Michal, Senior Loan Officer, Sterling Lending
As we prepare for 2020, many of us will be looking at our personal year-end finances, reflecting on the past year and preparing for the new. Being honest with ourselves is just as important as being honest with our lender. The following factors are items I have asked of myself – so let’s take a hard look at four key points that may help better position our operations for the upcoming year.
• #1: Assess land—is it draining your cash? Study our land base and really look at each individual parcel of land that we’re operating. Is each piece cash flow positive or cash flow negative? We’re not just looking at last year; but going back multiple years trying to determine a possible trend. Asking ourselves if the rent we’re paying make sense? Is it practical? Feasible? Accessible? Do we renegotiate? Terminate? Or continue to subsidize with other aspects within our operation? Ultimately, we need to be asking- “Is this land vital to our operation or is it pulling us down?”
• #2: Reevaluate living expenses. Go back and review our living expenses. I admit sometimes this is scary. One can be surprised by what the real number actually is. I’m not necessarily saying that the living expense has to be reduced, but knowing the true number is important. We really have to study it, be honest with ourselves and have full accountability. Once we fully understand and prioritize, we can ensure that those dollars are going where they are best utilized within our operation.
• #3: Have a Marketing Plan. Historically, when looking at the last couple of years, a marketing plan has been the determining factor between an operation’s profitability and cash flow. A marketing plan truly is imperative in order to help recognize when a marketing opportunity might be presenting itself. If we don’t know our break-even, it’s difficult to determine and value a good verses a bad decision. If you do not have a marketing plan, make sure that you have one in place before next year. A lender won’t provide it, but a marketing plan is not something you have to do on your own. There are great professionals out there that have different philosophies and ideologies of marketing. If you haven’t had a marketing plan before, talk to two or three prior to moving forward. This is your marketing plan and you need to be comfortable with it.
• #4: Use All Your Resources. As a producer we need to utilize all available resources. Have discussions with your lender, your accountant, your attorney, your crop insurance agent, and your merchandiser. None of these individuals will tell us how to run our operations, but they can give us insight into their proficiency area. We can all learn from each other, developing a solid game plan. This game plan will change with the tides, but will provide the foundation. We must reevaluate and adjust accordingly. It is with diligence and attention to detail that we can all start the upcoming year on solid footing with hopes of creating our own good fortune and opportunities. Contact your Premier Farm Credit loan officer and/or insurance agent and have a healthy discussion. While we may not have all the answers, our mission is to support and best position your operation for success.