$$$ & Sense: Designing for Profits by Rod Luke of Rendel McGuckian
GroundCover™ Issue: 30
High farm profits are gained in many ways. There is no blueprint that covers all graingrowing businesses, but you can look at a few design features.
Cropping farmers earning farm profits greater than $60,000 per household often have four similar features: Simple Uniform Systems — Accountability — Relationships — Innovation (SARI).
Simple Uniform Systems appear in all areas of farm businesses from the machinery and equipment to record keeping and financial monitoring. Simple systems provide a range of benefits that help build profits. It simply means using systems that are easy to operate, easy to teach others, easy to fix and which make it easy to make decisions.
Simple uniform systems make it easier for everyone involved in the business to understand and use equipment. With less time and effort required just to cope with the machines and systems, management can focus more upon the big decisions and less on day-to-day issues.
Accountability is about having someone to ask about decisions. This can be a spouse, parents, other relative or farm adviser. The person you use for accountability does not need to have a hands-on involvement in the farm but they must be able to demand to know about income and expenses.
Explaining costs and income to business partners will help you think through your plans. Budgets and monitoring are useful tools to help explain costs and income. Justifying decisions will also help you think through the risks.
Businesses using accountability often have good cost control, keeping operating costs to 50 per cent of income or lower.
Relationships are 'people skills'. People skills are important when dealing with buyers, suppliers, contractors, employees, advisers and partners. Strong relationships can help you achieve better outcomes in prices, credit, getting the right spares, or getting things done on time. Doing the 'hard yards' in relationships pays off when others repay you with extra effort. Sometimes it is also worth paying a little more for good relationships.
Communication is the key in relationships. Making sure others hear what you say is critical. Listening can also be more important than talking. Thinking about what others need to know in advance puts them in the picture and removes snap decisions or tough deadlines.
Innovation is a common feature among businesses with high profits. Innovation is the use of new technologies. This is common to nearly all farmers, but high-profit businesses will look hard for new ways to do a job simply and quickly.
Five top questions
Ask yourself — "Can I save time and effort on the farm? Does someone ask what income is expected from expenses? Am I good at explaining things to others? Am I always looking for better ways to do things?"
Do you have some SARI features in your business?
Contact: Mr Rod Luke 03 5441 4821