Considering farm expansion? Start with these 5 steps
One of the undeniable truths of farming is that there are finite methods to increase operational profit: squeeze as much yield as you can out of your ground, limit input costs and make smart decisions about operating expenses. But after you’ve exhausted all of these options, meeting your long-term operational goals will eventually require answering a tough question. Is it time to expand?
For farmers considering expansion, the below five steps—and the questions and answers they contain—can serve as a good starting point.
- Review your business plan: Expansion is not only about looking toward the future but looking back at where you’ve been. How is your business plan performing? Are the goals you set for your current operation being met? Can farm expansion lead to the return you’re seeking with your business plan? Make time to analyze and benchmark your past results to better inform how you will measure your future success. A post-harvest ROI analysis within Granular Insights can be a helpful way to look back at previous years.
- Identify areas of opportunity: After reviewing your business plan and assessing your progress toward your current goals, consider where your areas of opportunity lie. What strengths and weaknesses exist in how your business is operating, and how can you turn them into opportunities through expansion? Our Corn vs. Soybeans Calculator can be a helpful tool for weighing potential profitability of one crop versus the other.
- Lean on technology: To be successful in a consolidated ag market, technology needs to play a significant role in your operation. How can investing in new technology, like drones, AI tools and connected equipment, increase efficiency on your farm? See how other farmers are finding success through critical management practices of the digital-forward farm.
- Assess cash flow: Ensure your farm has the financial reserves it needs. Technology, as outlined above, is a critical factor in farm expansion, but often comes at great expense. What is the status of your current cash flow? How can you invest now in technology that will have a greater return in the long run? How will today’s business decisions provide you with an advantage and lower overall operating costs down the road? Consider how farm management software like Granular Business can help you keep a better handle on your finances.
- Keep an eye on the future: Finally, assess your farm expansion opportunity in the context of the future. What is the strategic vision for your farm? Have you started farm succession planning? What systems and processes need to be in place to ensure goals are met, not just a few years down the road, but in 20-plus years? What does continued growth look like on your operation five, 10 and 20 years from now?
With a steady shift of production to larger operations, it’s high time to think about your farm expansion strategy. But that doesn’t always mean more acres. Expansion can be attained by growing your profit margin, finding new revenue streams or homing in on new capabilities. As you assess your current operation and consider plans for expansion, request a demo of Granular Business to help you better understand what’s driving your profitability today and how that can factor into your plans for the future.
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