Business analysis a priority
GroundCover™ Supplement Issue: 132 January–February 2018 | Author: Craig Ruchs
While the GRDC has made significant long-term investment in grains research, development and extension to drive productivity, yield is only one element of the overall profit equation. Productivity should not be the sole measure of success, with price, cost of production and risk all important in determining the profitability of any grain-growing business.
In delivering enduring profitability for Australian grain growers, the GRDC invested in a national project ‘The integration of technical data and profit drivers for more informed decisions’. This project, delivered across 14 grain-growing agro-ecological zones (AEZs), involved a partnership between five agribusiness consulting organisations.
The project identifies the key management-affected profit drivers by AEZ and provides general guidelines to help growers manage them. The profit drivers were identified through the collection of more than 300 benchmarking datasets nationally, with data being analysed by the project partners. The quantitative benchmarking analysis was complemented by a qualitative survey of grain growers across each region.
The project identified four primary profit drivers influencing the long-term financial performance of grain-growing businesses:
- gross margin optimisation;
- developing a low-cost business model;
- people and management; and
- risk management.
The project identified a large gap in financial performance between the top 20 per cent of grain-growing businesses and the average business in each AEZ. This indicates considerable opportunity for many grain growers to increase profit, sometimes with little or no additional resource requirement or cost to their business.
Both management skill and mindset are key factors driving financial performance. The top 20 per cent of grain growers:
- have a systems focus to business management;
- focus energy on what is within their control;
- take personal responsibility for key management decisions; and
- have a high level of ability to implement change – knowledge alone is not enough, it is most often the capacity to put this into effect that makes the difference.
The project highlights the value and importance of interpreting findings at the AEZ level, with project partners drawing out local insights and perspectives. Environmental and enterprise characteristics unique to each agro-ecological zone can be explored through this applied project methodology.
However, it is important to note the seasonal impact on the data collected and therefore the recommendations provided should be considered a guide. I encourage you to discuss these in consultation with a qualified financial adviser.
Publications associated with the project, such as management guideline booklets, fact sheets and reports, tailored to each AEZ, can be found on the GRDC website by searching for the project code RDP00013.
This GroundCover™ Supplement presents a selection of the findings from RDP00013 projects, including their underpinning concepts, ways to optimise gross margin for each region, the impact of scale, utilisation of machinery and labour, as well as the impact of precision agriculture.
A series of GRDC ‘Opportunity for Profit’ workshops were also conducted as part of this investment, based on project findings and tailored to individual regions. In response to feedback and demand, planning is underway for more of these half-day workshops to be held in the future.
I hope the information presented here helps to inform you, helps in the management of your grains business, and challenges you to implement these learnings to achieve individual and broader business goals.
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