The Business of Farming: Five Critical Questions You Need to Answer
Over the last few decades the agricultural sector has witnessed a dramatic evolution. Changing consumer preferences, technological advancements and economic pressures are encouraging farmers to adopt more strategic and business-oriented approaches.
When farms are managed as businesses, they drive innovation, create jobs, and unlock new opportunities for growth. They can also experience:
· Reduced waste
· Increased efficiency
· Reduced operating costs
· Higher yields
· Expanded customer bases
· Increased revenue and profits
· Improved sustainability
In this article, we look at what it means to shift towards ‘farming as a business’. And we highlight the key questions we recommend all farmers think through as they consider making the transition.
The Shift Towards Farming as a Business
The agricultural sector contributes 2.7% to the national GDP and employs 2.2% of the workforce. Despite its significance, many farms in the sector struggle to thrive.
Why? The complexities of modern agriculture and the challenges faced by farmers in today's world:
· Fluctuating market demands
· Volatile weather conditions
· Increasing compliance obligations
· Resource scarcity
· Declining rural economies and communities
· Intensifying focus on environmental concerns
Farmers need to reassess their traditional methods and seek new pathways to sustainability and profitability.
At the same time we are experiencing generational change. Many ‘old-school’ farmers look to pass on their farms to their children or grandchildren. As they transition out, there is an opportunity and an urgent need to reassess the way the farms operate and take a more strategic approach to operations.
I've worked with people who didn’t have the opportunity to transition the farm as well as they would have hoped, often due to the untimely passing of a family member who held so much information in their head. 'Farming as a business' could have assisted those left, as they would have had a clearer picture of the overall farming business which would have been one less stress to consider whilst grieving for their loved one.
Paige Cross
This shift towards farming as a business is not a trend; it's a necessity for survival and growth.
What It Means to Run Your Farm as a Business
Running your farm as a business involves a fundamental shift in mindset. From seeing yourself as a farmer to embracing the role of an entrepreneur or CEO.
It means applying business principles to every aspect of your operation. From production and marketing to finance and human resources, and everything in between.
Instead of relying on intuition or following age-old practices, farm business owners analyse data, assess market trends, and make strategic choices based on informed insights.
Running your farm as a business also involves a shift towards a customer-centric mindset. Instead of producing commodities and relying on distribution agents, you aim to understand your target market's needs and preferences so you can deliver an exceptional product.
In this table below we’ve summarised what we see as the key shifts needed to operate your farm as a business.
Setting your farming business up for success
Transitioning towards a business-focused approach in farming offers many advantages. But the path to success can be uncertain and challenging if solid groundwork isn’t laid first.
We’ve identified five questions that need careful consideration by anyone looking to adopt a more business-centred approach to their farming operations.
What is the long-term vision for your farming business?
Business 101: Having a clear long-term vision is crucial to provide direction and purpose. It helps you set meaningful goals, make strategic decisions, and align your efforts and resources.
Your plan could include things like:
· Expanding your market share
· Pulling out of unprofitable markets
· Diversifying your revenue streams
· Improving your environmental impact and sustainability
· Reducing your debt load
· Investing in infrastructure
Is everyone aligned on that vision?
Farms are rarely solo ventures. Family members, business partners, investors and employees all have a stake in the future of your farming enterprise. Communicating your long-term plan is the first step, but you also need to ensure they are all on board.
Aligning diverse perspectives and interests can be challenging. Especially if there are disagreements or conflicting objectives among stakeholders. Getting an independent third party involved to facilitate discussions can be a good strategy in these cases.
Do you have a clear path forward?
A vision without a plan is pointless. A well-crafted plan provides clarity, focus, and accountability. It guides your daily decisions and actions.
This can be where many farm owners come undone. Because they might not know how to translate a long-term plan into short term actions. Or how to tailor them to their specific operations. Working with a business coach or planner with experience in the ag sector can help fill this gap.
What are your priorities for next 6-12 months?
Do you need to get more people for seeding? Is your equipment ready for harvest? Have you got an audit to prepare for?
Knowing what matters most helps you direct your efforts where they count. When you set clear priorities, you're not just deciding what to do – you're choosing what not to do. This focus helps you avoid distractions and stay true to your path.
What are the key relationships you need for success?
You already know that building relationships is key to your farm's success. Meaningful connections open doors to resources, expertise and opportunities.
Who do you need by your side to tackle your immediate challenges? And are there any relationships holding you back?
If you're feeling overwhelmed, don't worry – you don't have to go it alone. A trusted advisor can help you identify key connections and introduce you to people in their own circle.
Turning your farm into a flourishing business isn't easy, but it's well worth the effort. Shifting your mindset from traditional farming to entrepreneurship can unlock new opportunities for profitability, growth, and sustainability. Despite the uncertainties and obstacles that may be involved, the path to success will be smoother if you work through the questions above to set a strong foundation.
If you want to get started 'farming as a business', book an introductory call to talk about our new service and discover how it can help you get set up for success.