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AGRICULTURE
Farm Business Management - Benchmarking Survey Download the fact sheet PDF Format
Benchmarking survey says farmers need to aspire to the next level It's human nature to compare yourself to the people around you and see how you measure up. In farming, that usually involves eyeballing the neighbours and doing 'guestimates' based on things like the size of their operation, the age of their equipment and the scuttlebutt at the local coffee shop.
But in a global economy, you need to know what your competitors around the world are doing and you need hard data on things which can be accurately measured. It's not just a matter of idle curiosity - the actions of producers in New Zealand, Iowa or Argentina can have a major impact on your bottom line.
A new survey that looked at how Canadian, American and Australian producers stack up against each other found both good and bad news for this country: We've got the ability and skills to move ahead, but we need to do a better job of using business management tools.
The results of the survey of over 2,200 farmers in those three countries was presented by Farm Credit Canada at Excellence 2001.
"It's really a good news story in many ways," said Louise Neveu, FCC's executive vice-president and chief knowledge officer.
"We thought we were world-class in production and that's been confirmed." One of the main goals of the survey was to establish a foundation for future comparisons and so it covered a wide range of areas, including production management, human resources, financial and risk management, adoption of new technology, and business and succession planning. It also tried to measure how optimistic farmers in each country were about the future.
There were many similarities. Nearly all producers in all three countries keep financial records of their operations, just over half set profit targets some or all of the time, and there is a high level of use of computers and the Internet, especially when it comes to getting information about production, marketing and the weather.
A large number of Canadian producers are also using the Internet for communicating with suppliers (49 per cent of those surveyed), communicating with producers (40%), making purchases (38%), banking (37%), selling products (23%) and investing (23%). "Canadian producers have adopted technology at a very rapid pace," Neveu said in an interview following the conference.
Even though producers have been quick to join the cyber age, their fixation on production issues hasn't changed.
"We're very, very good at producing - just ask us and we'll do more," noted Neveu. But as any financial advisor will tell you: It's not what or how much you produce, but how much you make from your production that counts. And the survey suggests the competition has a leg up on their Canadian counterparts.
Only one in six producers in this country has a written business plan - barely half of the level found in Australia and also well behind the Americans.
A lack of a written business plan is a common failing in many small family businesses, but no one is surprised when those businesses don't do well, said Neveu.
"I think that we would probably be less kind to other small businesses (in other sectors) if they fail because they don't have a business plan.
"If someone is setting up a doughnut shop and has no notion of traffic at their location or what products people want - well, the fact that I love making doughnuts and make the best doughnuts in the world isn't really relevant, is it?"
Lack of planning can sink business The value of the survey isn't so much in the specific numbers, such as the fact that 16 per cent of Canadian producers have written business plans versus 29 per cent in Australia, said Neveu. The key finding is that the vast majority of producers are not taking advantage of management tools that will benefit their businesses.
The "next level of sophistication" will see farmers not only adopting annual business plans but also things such as five-year plans, she said.
"You want to be able to sit back and ask the fundamental questions: What is it that I want to achieve? What is my goal in this business? That answer gives you the ability to map out a plan to achieve it."
Along with greater acceptance of the value of written business plans, Australians tend to be more optimistic about the future - 79 per cent say they are very or somewhat positive about the future, compared to 68 per cent of Canadian producers surveyed. Not surprisingly then, the survey found Australians more likely to be planning an expansion or diversification of their farm business.
Source: Taken from the Canadian Farm Manager Newsletter
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