Looking back, then forward in the New Year!

Take time to mark the height of your kids on the wall, then, mark the growth of your business.

As our kids were growing up we would mark their growth with lines on the door jamb or on the refrigerator. They, as well as us, were excited to see how much they had grown. Now, our children are long past that stage and no longer growing. But the principle remains, that making marks is important in order to see progress and growth. 

We’ve just come through 2011 and are looking forward to what 2012 will become. What has changed since 2011 began? How has your family changed? How has your family business changed? What are the marks that indicate the extent of change?

Taking some time to assess your progress over the past twelve months will not only help you to decide how best to move forward, but it may give you something to celebrate as a family and as a team with your employees. 

Some changes on your farm are easy to note. For instance, a dairy farm may ask these questions: Are you milking more cows today than you were at this time last year? Are you shipping more milk than at the beginning of 2011? Is the quality of the milk better than at that time? Have changes taken place that allow your farm to be more productive or efficient which can help lead to increased profitability?

I want to encourage you to spend some time during the first few weeks of the new year and evaluate the changes that have taken place in 2011. Let me suggest several areas to think about:

Growth – A business needs to grow over time in the amount of product produced and sold. For dairy farmers, look for an increase in milk sold of 3-5% per year on the average.

Rate of Return on Farm Assets – This is a good measure of overall profitability and tells us how the business compares to prior years and to outside investments. A rate of return on farm assets greater than 10 percent is strong. You can download a Farm Financial Scorecard to help you measure your farm’s financial ratios.

Farm Debt to Asset Ratio – This is a good measure to chart progress particularly after 2009 when many farms, particularly dairies, went backward on debt.

Family business structure – This is more of a check as to whether you have taken steps toward the transfer of farm ownership and responsibilities if appropriate. It needs to start with conversations with the next generation. Don’t let another year go by without some action here.

Cattle comfort – Unless we step back and take a hard look at cow comfort, at all times of the day and at all times of the year, for all age groups – then we may assume better than our cattle experience. Take some measures of proper stall usage, of airflow in the holding pen and dryness of calf areas.

Labor management – How have you grown and changed as a labor manager? What things did you do, and still do, to improve communication on the farm? How is employee morale – really? How is employee turnover?

Family time – Dairy can be a consuming business, but if we allow it to consume us then it is at the expense of spending non-work time with family. Let them know, by the time you spend with them, that they are more important than the cows. 

There are many more measures that you can evaluate. The MSU Dairy Farm Business Analysis Workbook can help you with calculations. If you would like assistance, check with your local MSU Extension office and request information on how you can schedule a meeting with your area farm management educator to help you do a full farm financial analysis for your farm.

The key is to choose some measures that you will evaluate and follow through on those. Once you have taken measures of the health and growth of the business, and compared those against where you want them to be, then goal-setting for 2012 becomes easy. See how you have grown!

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