Most agribusiness owners have a longer term vision of what they are trying to achieve.
The ones that don't may not be in the game for the long haul. As margins in agriculture tighten and seasonal conditions vary, a long-term plan is crucial. Not even the most historically reliable areas are totally immune to poor seasons.
Recently, I have seen examples of what used to be called short-term planning. One business was considering a three-year time frame as short-term, and the other business was using six years as its benchmark. In some ways, short-term and long-term planning have morphed into each other.
The decisions for these two businesses were driven by the capital expenditure budget. As capital investments in agriculture are generally expensive, a longer-term horizon is critical.
On odd occasions, agribusinesses have crashed and burned due to poor planning.
In some cases, there are millions of dollars on the line with proposed expenditure, and detailed planning is crucial. Sometimes, the long-term viability of the business could be threatened. While that may sound dramatic, on odd occasions agribusinesses have crashed and burned due to poor planning.
This type of planning doesn't only apply to agribusinesses, it applies equally to all businesses, particularly the suppliers of agribusinesses. These businesses have to be on the same page as their clients, and finesse their strategy accordingly.
It can take a while for an agribusiness to gear up for a major change, and the supplier will also need time. The numbers in the supplier's world are normally a lot bigger than for the agribusiness they service.
The more the agribusiness communicates with its key suppliers, the better it will be for both parties.
Some short-term planning cannot be forecast, and is forced upon the business by circumstance. An example of this is the recent fires, which are both tragic and unexpected.
Some businesses will recover faster than others. Sectors such as viticulture have huge business decisions to make. Do they replant immediately? What varieties do they plant? And, what are the cash flow implications until the business returns to full production? In these instances, the sooner the conversation starts with the bank, the better.
Related reading:Quiet times ideal for making plans
Those businesses that don't have to deal with an unexpected circumstance have more time to ruminate over decisions. This is a better option - if you have the choice - but can sometimes lead to paralysis by analysis. I have seen this happen before, and I have been guilty of it myself in the past.
There are lots of ways to assess business options. This can be done internally, or by seeking advice from the accountant - particularly if some number crunching is required - or another source such as an agronomist.
Normally, the first port of call is speaking to another agribusiness owner who has 'been there, done that' so to speak. I find that agribusiness owners are, on the whole, quite happy to share information.
Once a decision has been made, the agribusiness owners cannot worry about whether they could or should have done it differently.
It was a decision made with the best information at the time, so it's best to see it through, and focus on making it successful.
- Details: bagshawagriconsulting.com.au
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