Forget size and commodity, it’s management that makes you money

Report urges farmers to get out of the coffee shop, network more, and start acting like 
other businesses when it comes to HR practices

When it comes to crops and livestock, Canadian farmers are top notch.

But when it comes to making money, they’re all over the map, says a new report by the Conference Board of Canada.

“Over half of all farming operations achieve either very high profit margins (more than 20 per cent) or very low profit margins (negative margins of more than 10 per cent) in a given year,” according to the report, entitled Seeds of Success.

And it’s management, not size, that drives profitability, the report states.

“Over the past decade, smaller revenue farms have occupied a greater percentage of the top profitability quartile than have larger ones. At the same time, smaller farm revenue classes also have the greatest share of farms in the lowest profitability quartile.”

A survey conducted in conjunction with the study concluded there are two winning strategies, depending on the type of operation: Commodity producers need to lower costs, and those able to differentiate their products need to focus on marketing.

“Both priorities, however, have become more important for farming businesses of all kinds,” the report states. “To achieve that requires increasing levels of managerial focus and skill, capital management, marketing management, people management, and management of relationships.”

And all farmers, no matter what their size or product, need to be thinking about what consumers — both at home and abroad — want. Those who do are getting ahead, the report says.

“Farmers, who have traditionally not had to worry much about finding buyers, are finding an increasing need and opportunity to tap into non-traditional marketing channels — a change that reflects the increasing demand for agricultural products with specific quality attributes.”

A shortage of skilled workers is growing worse, but the report says the solution is staring farmers in the face. Adopt “human resources standards and practices that rival those of other industries,” it urges.

Along with learning how to be a better boss, farmers need to be less conservative when it comes to innovation and recognize that being closer to the leading edge can pay significant dividends.

Not surprisingly, the report also urges farmers to base decisions on whether to buy or rent land and equipment on the financial numbers.

But it also recognizes that as business people, farmers face a lot of tough decisions. If you want to make the right ones, it says, then spend less time in the coffee shop.

“Improved interpersonal and relationship management skills are important to overcoming many of the challenges of managing capital, marketing, and people. The image of the farmer as an independent and solitary figure is increasingly at odds with the realities of successful farming business.”

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