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Positioning your farm & ranch in 2017

As 2017 begins, it is important to consider that it may be another challenging financial year. However, a little preparation will be time well spent and can help your operation thrive into future years. In light of this, here are tips to help you plan.

1) Establish profitability and cash flow goals. The first step for preparing and planning for 2017 is creating a realistic budget and cash flow goals. In addition to careful budgeting and close evaluation of costs, run multiple budgets under different scenarios. Consider what a worst-case scenario and a best-case scenario could look like.

2) Be conservative with living expenses. In the current ag economy, it is a good idea to take a detailed look at your personal expenditures and trim where possible. Create a personal budget that fulfills the necessary expenses and eliminates those that are unnecessary. Some personal budget items that you may need to take a careful look at could include new vehicles, lake cabins, vacations, etc.

3) Communicate. It is important to discuss your current situation and future plans with others involved including tax, marketing and financial professionals. Bad surprises will likely be stressful for everyone involved, given the general agricultural economy. Maintain an open and proactive relationship with these individuals and be prepared to bring solutions or suggestions for solutions to current challenges.

4) Be open to opportunity. A little research can open up your operation to a plethora of financial and educational resources. Make yourself aware of programs available with the Farm Service Agency and other government entities. The North Central Research Extension Center and your county extension agency will also provide a variety of educational opportunities that can help improve your operation.

5) Identify the best uses of your time and resources. There are always a lot of things on the farm’s to-do list. There are also a lot of distractions out there. It seems like there is a new product, service, or app to help you improve the management of your farm every time you pick up a farm magazine or go to a farm show. While all these tools might be useful and helpful, it’s important to identify the best uses of your time and resources. For some farms, this might be time spent scouting fields. In other cases, it might be putting time into financial planning, working on equipment, or negotiating input prices. It’s important to recognize which activities are best suited for your management given your operation’s needs and your skills. In short, are you spending your time on the things that are likely to have the biggest impact toward meeting your profit and financial goals? Make sure to stay focused on the things that matter the most. When possible, utilize detailed record keeping. This will simplify the planning process for future years.

6) Invest where necessary. Whether it be a bull for your ranching operation or quality seed and fertilizer for your farming program, spend your money where you will receive high profitability. It’s OK to make investments that will help provide higher return in the long run. On the flip side, eliminate those elements of your operation that are costing you. Pay careful attention to your livestock herd and make certain you are only hanging on to quality females. Evaluate your crop rotations and consider alternative crops that may be more economically attractive. This is also a good time to consider whether your equipment line is the right complement for your current size. Making a hard choice today may position you for better opportunities tomorrow.

7) Consider both the ups and downs of the risks you’re taking. The old glass half-full/half-empty example remains relevant today. Try taking both perspectives in these tight times. When considering new opportunities – or revisiting existing operations – it’s important to make certain that ample time is spent evaluating the upside and downside aspects of the risk. Otherwise, you’re likely to overlook the opportunities – or challenges – that might be present.

8) Manage Risk. While many hope it doesn’t need to be utilized, it is important to be prepared for life’s unexpected circumstances. This includes purchasing the right crop, property, casual, liability and even life insurance to properly protect you, your family and your operation. Having the proper risk management in place could make or break the survival of a farm and ranch operation in the event of an unforeseen circumstance.

9) Plan Succession. It is often hard to start the conversation for farm and ranch families to plan succession, but a properly structured succession plan provides opportunities for continued business with current generation of owners and managers and also establishes working relationships for the next generation. When planning be sure to include a power of attorney and consider implementing living wills and health care directives.

Never underestimate the power of realistic budgets, goals, and proper plan execution. These elements will likely be critical to finding success in this economic environment. Staying focused on your goals and managing what you can control will help you stay on the path to a successful 2017.

Vangsness is Senior Vice President at United Community Bank, a member FDIC.

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