The Top 11 Pitfalls in Farming
March 13, 2013
- Not knowing your Cost of Production: COP, or what it costs you to produce one unit is the lynchpin for profit. Every management decision must be weighed against how it affects your COP. Too few farmers know their cost of production and if you do not know your COP, can you truly be considered in the business of farming?
- No plan for transferring the farm to the next generation: Life happens, but without adequate planning and preparation it may not happen the way you desire. Transitioning the farm is a long term, on-going and arduous process encompassing every segment of the farm and family. You need to start early, involve everyone, and modify as life provides changes.
- Inadequate financial recordkeeping: If you keep your financial records only for tax preparation, Uncle Sam appreciates your efforts but you have given up a management tool for determining COP and making profitable decisions. Without adequate records for making decisions your outcomes are based on guesses and wishes.
- Lack of a clearly defined business plan: Farmers are great at planning day-to-day production activities but long-term plans get lost in the every day work. Planting the crop, breeding the cow, and marketing the crop must happen, but determining how each cog relates to profitability will keep you in business for the next generation.
- Lack of Communication: Farmers tend to be uncommunicative, but family businesses have many official and unofficial partners with a stake in the business. It is important to keep these partners (spouse, children, employees, lender, equipment dealer, farm supply dealer, etc.) aware of what you are doing at least to the level of their involvement.
- Avoiding or deferring taxes: The desire to not pay taxes leads to tax decisions that may have long-term negative implications rather than decisions that manage for long-term profitability. We often forget that the tax bill will come due some time in the future.
- Lack of financial reserves: Both businesses and families lack the financial reserves necessary to make weathering tough times less difficult. This current economic downturn has changed the landscape and businesses will need to depend on these reserves in conjunction with tools provided by their lender.
- Not managing family living expenses: The family can be a black hole in sucking up money. The only way to manage that black hole is to know what it costs your family to live and then to manage your resources.
- Following your neighbor: Farming operations are different and the factors that drive your neighbor's decisions are not the same factors you deal with. Why should you follow him? I bet he did not get to be successful following his neighbor.
- Jumping on the latest/newest/hottest enterprise: The learning curve for new enterprises is steep and expensive. A lot of homework needs to be done before launching a new enterprise, and it is rare to see that homework done. Because an enterprise is successful somewhere does not mean you can make it work here, but the reverse is also true. The right idea, coupled with the right resources, markets, and management traits are essential in raising an idea from the kitchen table to a profitable enterprise.
- Not training the next generation: Farmers are good at teaching the younger generation about production but less so about financial management. This has a lot to do with a lack of communication, murky long-term plans, and a willingness to share control. If the farm is going to survive for generations, that training must occur.
Upcoming Events
LERGP Coffee Pot Meeting #2
May 8, 2024 : LERGP Coffee Pot Meeting
Irving, NY
Come join us for timely and pertinent vineyard discussion, coffee, donuts, camaraderie and pesticide credits.
LERGP Coffee Pot Meeting #3
May 15, 2024 : LERGP Coffee Pot Meeting
Ripley, NY
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LERGP Coffee Pot Meeting #4
May 22, 2024 : LERGP Coffee Pot Meeting
Burt, NY
Come join us for timely and pertinent vineyard discussion, coffee, donuts, camaraderie and pesticide credits.
Announcements
Welcome Andrew Holden to the LERGP team!
In case you have not heard yet, we have filled the vacant position of Business Management Educator. We are pleased to welcome Andrew Holden to our team. Here is a brief introduction with a little background. Please stop in to say hello and introduce yourself. Bring questions- he is ready to get to know you and your farm operation!The Lake Erie Regional Grape Program welcomed Andrew Holden, LERGP's Business Management Specialist, to our team on March 1, 2024, filling the vacancy since May 2023. Andrew pursued his education at Ohio State University, earning a B.S. in Agribusiness and Applied Economics and later obtaining an M.S. in Agricultural and Extension Education. In his previous role he served as the Ashtabula County Agricultural Extension Educator with Ohio State University Extension for the past 5 years. Andrew is eager to bring his passion for agriculture, grapes, and wine along with his economic knowledge to this new position and to the growers in the Lake Erie Grape Region. He is looking forward to engaging with growers to help him understand their needs to ensure that his role equips them with the tools needed for success. His office is located at the Cornell AgriTech campus in Portland, NY (CLEREL).
Commercial Vehicle Awareness slide presentation
NYS Trooper, Matt Luft, presented on Commercial Vehicle Awareness at CLEREL on Thursday, August 2nd. He has given us the permission to share his slides for you to reference at your convenience to share with others or to review. Please reference this link.LERGP Podcasts- check them out!
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