Better Decisions: What business skills does the farmer need to succeed?

Sunday, November 2, 2008

Many of the skills or tools a farmer needs are the same as a business owner in an industrial park, among them an effective marketing plan

by DORENE COLLINS

This past September, while working at the Outdoor Farm Show in Woodstock, I was faced with reality by what I saw upon entering the grounds. There, against a beautiful September sky, was a towering piece of farm equipment with a six-figure price tag.
I found this to be a wake-up call about the financial reality of farming in today's highly technological and competitive marketplace. Besides the capital investment in land and buildings, the investment in machinery on the scale I saw says volumes about the financial and business management skills required by today's farmer. 

In my travels across the province, I enjoy seeing farms along the concession roads and liken them to a business producing products in an industrial park in the city. Both require capital investment in buildings and machinery, access to infrastructure, reliable labour and good management. The most striking similarity is that both require markets for the products they produce in order to stay profitable and be able to re-invest in their businesses. 

What business skills or tools should the farmer on the concession road or the business owner in the urban industrial park possess to run a profitable business? Here are a few they need to be familiar with:

• The importance of an effective marketing plan guaranteeing a market place with profitable returns for their product or service.
• Financial analysis tools, such as managing cash flow, preparing business plans, risk management, bench marketing and measuring financial performance, and cost of production.
• Business arrangements such as corporations, partnerships, joint ventures.
• Business agreements, such as lease and rental agreements for equipment, buildings and land.
• Financing and taxation, such as business insurance, commodity pricing, tax on transfer of business assets.
• Human resources applications and tools, such as employee health and safety standards, Canada Pension Plan, recruitment and human resources management plans.
• Succession planning, such as developing a succession plan for their business whether family members are involved or not.

Whether you are planning to decrease the percentage of wholesale for your strawberry production and focus on direct sales through a Pick-Your-Own operation, or whether you decide to rent or purchase extensive acreage to increase production of corn and soybeans to sell through the commodity marketing system, being familiar with the importance of an effective marketing plan which guarantees a market is vital.

Do you have the ability to get the right product into the right marketplace at the right time and the right price?

The marketing world is littered with failed products which could have been successful if the formula for success had been different.

Effective market research is the most important activity one can undertake to reduce the risk of your product or service failing in the marketplace. Market research does not have to be complicated or expensive. It involves examining the following:

•    Features and benefits of the product or service;
•    Target market (who is most likely to buy it);
•    Distribution options (best way to reach the target buyers);
•    Market demand (possible buyers, volume, price);
•    Trends (what is the expected life of the product);
•    Expected price (highest, lowest, and average price);
•    Expected sales (volume and market conditions)

Once armed with the results of your market research efforts, you are ready to proceed in developing a marketing plan which will place your product or service in the marketplace with minimum risk and, most importantly, poised for maximum profit.

The Business Management Unit with the Agriculture Development Branch of the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) is committed to assist farmers and rural entrepreneurs to access the necessary business skills and tools. Informative fact sheets, publications, workshops and other advisory services are available just a click or phone call away at: www.ontario.ca/agbusiness or
1-888-466-2372. BF

Dorene Collins is Marketing and Customer Service Program Lead with the Ontario Ministry of Agriculture, Food and Rural Affairs. Email:dorene.collins@ontario.ca