It is amazing how time flies and it seems to accelerate as one grows older. The quarter-century mark is in the headlights and it only seems like yesterday when we were discussing preparation for Y2K when the clock was going to strike midnight and computer systems would shut down. As we approach 2025, the opportunities for business and personal prosperity will not focus on size, enterprise, or the next big thing. Hemp, llamas, emus, and catfish in the Southern Delta all had the “next big thing” exposure, but were found to be oversold in many cases. Success for business and personal prosperity in the future will be about being a “five percenter.” These producers are generally five percent better in many areas of their business such as production, operational efficiency, marketing, risk management, finance, and human resources when compared to their peers. This must be mastered while maintaining focus on your core values, goals, and vision.
What do the five percenters often do that others fail to achieve? In short, they go the extra mile by being a little bit better in many areas. There is an old saying that there are no traffic jams in “the extra mile” so you will be a lone wolf or, in statistical terms, a standard deviant.
The five percenters have written goals for their business, family, and personal life. In terms of their personal life, they have goals to support their physical, mental, and spiritual health. A survey of the elite group of producers at The Executive Program for Agricultural Producers (TEPAP) found that only 28 percent had written goals this year. This is compared to only four percent of Americans having written goals. Producers with written goals that are monitored generally earn more in their lifetime and have stronger mental health.
Next on the list, the five percenters take time to develop and monitor their cash flow projections. Within the cash flow, they have a set of spreadsheets with tabs to test financial production and other key assumptions to keep the business within the financial guardrails. The top five percent realize that a cash flow is not only for the lender, but is a valuable tool for the business.
Fifteen minutes per day or 10 percent of time annually should be devoted to planning. The five percenters not only plan and strategize, but they execute and monitor results. They realize that plans are often disrupted by macroeconomic events or big picture events such as geopolitics, weather, and competitors. On the microeconomic level, things happen in the business that are disruptors and the key is not to repeat the same mistakes twice.
The five percenters know their cost of production and break even points. They budget for the farm and each enterprise and also compare themselves to peers. This is where a farm record-keeping system can be a valuable tool for peer assessment.
More five percenters have formal advisory teams which may include crop and livestock consultants, lenders, and financial planners. Some producers are even reaching out to the non-financial public and other businesspersons to enrich this process. Networking and surrounding yourself with good people often energize your business strategy and personal life.
To be a five percenter, you must have a risk management and marketing plan. The magnitude of numbers due to inflation and increased interest rates requires one to conduct a risk assessment to put the puzzle together that fits your operation.
The Achilles' heel of even the most successful businesses is a transition plan. Unfortunately, the transition plan is often placed on the back burner of management priorities, unless an episodic event or traumatic event takes place. Five percenters know that a management and employee transition plan combined with an estate plan is often a journey that needs to have a coach and facilitator to keep one on task.
While this list is not comprehensive, these are a few characteristics of successful producers that I have found and observed over the years interacting and engaging with the players of the agriculture industry. How does your business stack up?
Dr. David Kohl energizes agricultural lenders, producers and business professionals with his keen insight into the agricultural industry through extensive travel, research, and networking around the globe. He is a Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship at Virginia Tech, Blacksburg, VA. Dr. Kohl has traveled over 8 million miles in his career and conducted over 6,000 workshops and seminars for a variety of agricultural audiences. Additionally, Dr. Kohl’s personal involvement with agriculture provides a unique perspective into the future trends of the agricultural industry and economy.
