External praise can help create confidence

External praise can help create confidence

Agribusiness
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Recently, I have seen a few examples of agribusiness owners that are doing a really great job, but they are less confident of their success.

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Recently, I have seen a few examples of agribusiness owners that are doing a really great job, but they are less confident of their success.

I found that they thought they were on the right track, but had nothing else to compare themselves against.

Sometimes, we all get a bit insular, and can't see the wood from the trees. If you spend most of your time focusing on your own matters, it can be hard to see how your business is travelling in a macro sense.

I am in the enviable position of assessing the numbers of many different agribusinesses. These businesses are in various sectors of agriculture. While they have differences, as you would expect, they also have similarities. This is most evident in the profit and loss and balance sheet.

Being understood and valued is very powerful for any individual.

The numbers don't lie, the debits and credits tell the story, and there is nowhere to hide once the figures are laid out on the table - metaphorically and physically. It is a relatively quick exercise to do some back of the envelope calculations to see how any business is travelling.

For example, there are certain key ratios that can tell a story quickly: net profit ratio, return on assets, return on equity, operating cost ratio, interest cover, debt service cover, and loan to value ratio.

Banks will be particularly interested in most of these ratios, as they show the health of the business, and can be measured against historical performance and budgets. There are also benchmarks available that allow producers to compare themselves with others.

Benchmarking is not the be all and end all, but does give a comparison of how a particular business is tracking against its peers.

Yield and price will always be the two levers that make the biggest difference in agriculture. Unfortunately, agribusinesses cannot fully control these aspects of their businesses.

But there are other areas they can control, and a close examination of the profit and loss will reveal these. Careful expense management and timing of purchases are two factors that normally can be managed to a certain extent.

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If an agribusiness has a plan and is passionate about executing its plan, without deviation, the ratios will look after themselves. A great deal of satisfaction can be derived by following through on a well thought out strategy.

Equally, people always appreciate positive reinforcement. The overwhelming majority of people are doing a great job with their lives, but there is so much information, particularly online, that gives a distorted view on others' lives, and sometimes it can be a bit disheartening.

Being understood and valued is very powerful for any individual.

The business owner I had in mind when I came up with this topic was quietly very pleased when I told him just how well he was doing in front of his advisory group.

This person is very understated, and could certainly be classified as a quiet achiever. When I congratulated him, he had a very distinct look of satisfaction on his face. I think that said it all.

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