Business planning can help

all aspects of farm life

Without a plan and written goals, farms may fall into trouble

Business planning may not be something farmers relish, but it's critically important for the farming operation and often for family relationships, too.

Dick Wittman is part of a 19,000-acre family operation in Idaho with crops, cattle and timber enterprises. He has also worked as a consultant and lecturer in agri-business for decades. He spoke at the recent Wisconsin Farm Bureau convention in Wisconsin Dells.

Farmers need to think seriously about business planning and write things down. "Are you getting a passing grade in farm management?" he asked his audience rhetorically.

"Working with family is not always a bed of roses. There are consequences when we don't do things well.

"As we design a management structure we need to also think about positioning the business for the future. There's a difference between letting it happen and making choices. In 30 years I've heard horror stories that will ruin you appetite," he said.

The first time he gave this talk was in 1983, he said, and after the audience left there was an older couple left in their seats, weeping. "They told me they had run off all four of their sons and they never knew why until tonight," Wittman recalled.

In another case a mother and son no longer spoke to each other and had spent $150,000 in attorney fees to split up the farm. The woman was told she was never going to see her grandchildren again.

"I'm a firm believer in family farm businesses, but if we can't run the business the family relationship will be destroyed. As an industry we have to take this seriously."



Forming a

business plan

The first step in a business plan is to establish mission statements that talk about the core values of the family operation and everything needs to be written down. "We never really make a decision until we write it down."

Further planning involves organizing and dividing responsibilities, setting policies and then communicating and coordinating these thoughts.

There must also be some kind of system in place to measure performance.

Because most farms are family businesses, it's also important to talk about values. "What are you passing on? Are there career opportunities? Is there a good working relationship? You need to think about values, philosophy and ground rules," he said.

One of the most important things to think about is whether or not the family members share a common set of core values. That is the kind of thing that can't be forced into a working family relationship, he added.

Wittman says his dad and two uncles who built the family's farming operation didn't write things down but they shared values like striving for excellence and adopting new technology and practices when they came along.

Conflicts can arise when family members have different beliefs and attitudes.

In a family business operation it's important that everyone be equal, he said, and that performance is used as the measure. "The attitude that it's okay to be a jerk because I'm family just isn't going to fly," he said. "Bad chemistry destroys businesses and family relationships."

Farmers should think about having a long-term plan and an annual plan for their operations. "Succession planning or strategic planning is not something that should wait until you've had your first heart attack."



Set Goals

One of the first steps in this process is to set goals and put them on paper. "Only about 28 percent of people do this. Planning starts with setting goals," he said. Goals should include aspects of personal and business life.

Anxiety and stress can destroy businesses and extended family, he said, and planning is one way to fend off some of those problems.

Dividing the working roles in a family business should be part of the planning process. "You need to think about who should be on your bus and where they will sit - and most farmers don't think about this."

It may be difficult, but incompatible members of the team will need to get off the bus. "You need to get the wrong people off the bus and put the right people with the right talents in the right seats."



Spell it out

The planning process should also include working on a structure for the business and accountability for family members and other workers. "Do key members have written job descriptions? Farming today is more complicated. Often we have more partners and owners working together. How are you managed?"

It's also a really good idea to spell out compensation packages for various people in the operation. He recalled one Montana farm where two brothers and their wives got into a disagreement over their houses. First the wives quit speaking and then the husbands quit speaking.

Soon one of the men hit the other over the head with a hammer and the farming operation ended. Wittman says that situation could have been alleviated if compensation, including housing had been spelled out.

It's important to decide on the jobs people will have based on their competence and that good performance should be rewarded.

Farm owners should also take care to reward their children fairly as compared to other people who work on the farm. "As parents you are running your kids' first business school and you need to be careful about the lessons you teach them.

"The lessons you teach will be the lessons that get passed on."



Standard operating

procedures

Wittman said farms should also decide on standard operating procedures (SOPs) for repetitive jobs. There should also be written safety protocols for the farm and a communication system to make sure these things get done.

"As family businesses we don't think we need to communicate professionally, but we do," he said.

Agriculture is a business where there can be "so much prosperity and so much panic" at the same time, he said. Somebody has to take the lead as transition coordinator and facilitator. "It's a lifelong process to manage those resources."

Of course working capital, debt-to-asset ratios and unit cost of production are important along with good record-keeping.

Wittman encouraged farmers to think about many aspects of life - not just the business. They need to think about social life, health, spiritual life, recreation and community and how family members can feed all those parts of their life.

"Professional management is not an end in itself. It's a way to improve the total quality of life. All these things are improved is you sharpen your management."

Wittman holds a Masters in Business Administration and worked for Farm Credit for eight years.