Get a broader view of farm success by measuring multiple areas

When you think about a successful farm operation, what comes to mind? Maybe the operation itself looks a certain way. Maybe it’s doing extremely financially well as a business.

Maybe the people on the farm are working very hard to progress toward certain goals that are part of a long-term plan for the operation.

It might seem obvious that financial success is part of what creates a successful farm operation. After all, the farm is a business. Without financial success, a business will cease to exist.

Farm financial topics are often highlighted in my column because financial success must be in the definition of a successful farm.

Multiple Measures

Is financial success the only measure of success that makes sense or is even worth measuring on the farm? Many farmers would instinctively say no.

The financial metrics of the farm are lagging indicators: metrics that tell leaders something about what’s already happened and the results of the decisions the leaders have already made.

But they don’t tell leaders as much to help with future planning. Because of that, it can be helpful for farm leaders to have other sources of information and feedback about what’s going on in the farm in real time.

On the farm, a single economic cycle equals the length of a full crop year. Many farmers find it challenging to get meaningful insights in greater frequency. That’s why having multiple areas to measure the farm’s success can be very helpful.

The farm’s financial metrics are still always going to be a good compass to find out how the farm has been doing recently, but there are other areas that farm leaders can look at more often to help the operation improve continually with an eye to the future.

Define It Out

The first step to take is to create a definition of farm success for your operation. Every operation has unique factors at play, as I’ve discussed in past columns.

Use everything you know about the uniqueness of your operation to create a specific definition for your operation of exactly what farm success means to you and your leadership team.

Try to get as specific as possible in this definition. How will you and other leaders know when that desired success is achieved?

What areas will you be looking at to determine that? Remember, it’s not financial success alone, though, of course, that should be part of your definition.

One way to go to work on this is to have a long-term strategic plan for the farm’s future that includes a breakdown of the strategic goals that are going to move the farm toward how you’ve defined success.

These goals need to include timelines for the completion of each project. One way to assess how things are going on the farm is to look at the progress that’s being made toward those goals.

In other words, how much movement toward completion is being made on each goal since the last time it was assessed.

What’s The Cost?

Knowing and valuing the opportunity cost of various opportunities that are available to your farm must involve analysis at the financial level.

Very often, business leaders, including farm owners, can find themselves focusing on areas and opportunities that they enjoy, but that might not necessarily be making the farm any money.

That’s why bringing in the financial element is so important. That way, farm leaders can first do a financial “sizing up” of the potential opportunity.

This includes putting actual numbers on the spreadsheet as much as possible and solid estimates where actual numbers can’t be known. View opportunities in terms of the impact on the overall operation.