“Pick them up and run with them hard,” accountant Pita Alexander told farmers at a field day at the Northland Agricultural Research Farm (NARF).
“One of the saddest things I struck over the years with my troubleshooting role was just how many farming couples and their advisers did not pick up the signals which were loud and clear, often over a five to 10-year period and the whole problem compounded, often with a disastrous end,” he said.
Unrealistic expectations and procrastination caused frustration.
Farmers should prioritise available cash, resources and time.
“Some couples are very good at one of these but you need to be competent at all three.”
Business decisions needed to have a positive hit rate of at least 80%.
He entitled his address “Profit is a decision, your decision” and said his practice’s top group of farmers budgeted for profitability and so were aiming for it.
“But the bottom quartile are waiting for the end of the year to see if there’s any cash in the business,” he said.
A profit target that was difficult but achievable should be set.
“A sound, net farm profit in most cases tends to be a function of your low cost of production more than the sale price of your products,” he said.
“The key, of course, is a combination of the two.”
There was a good chance the first five years in farming would shape a farmer’s last five years with those in the top and bottom quartiles tending to stay there.
But if the second group could write down in within two minutes six business areas or issues they knew they were weak on they had a very good chance of being in the top quartile group within three to five years.
Calculated risks were part of being in any business.
“The key word though is calculated,” he said.
“I’m not against toys but I am against toys which eat your lunch.”
While being an early adaptor of new ideas, technology and developments could be a good move sometimes waiting for the third bounce was a better choice. And the concept of being an autumn spender still had merit because “by that time you know how much cash you don’t have”.
Alexander said more people talked themselves into failure than into success.
Log-jams with people tended to be worse than financial log-jams so needed to be broken up and prevented from reforming.
Women were better at spitting things out and once issues were on the table they could be ring-fenced and dealt with.
“You’re not going to make progress on problems in the freezer,” he said.
When it came to staff he urged farmers to hire character and train for skill.
But the speed and horsepower of the boss would tend to be the speed and horsepower of the team so brutal decisions needed to be made by the person at the top. Farm committees needed to be kept small.
“Big committees tend to help minimise losses but can never agree long enough to make long-term profits.”
For maximum attention nothing could beat a big mistake.
“Burn the mistake though into your non-repeatable memory banks.”
Pita Alexander’s tips
- Forget perfection – excellence is the key objective.
- Don’t waste time trying to justify something that’s obviously wrong.
- If you can’t afford it, you can’t afford it.
- People listen much better when they are in a down cycle than in an up cycle.
- Wage war on only one front at a time.
- Get the direction right then the speed.
- Cashflow is more important than your mother.
- For every imprudent borrower there’s an imprudent lender.
- Very often the most boring parts of the business are the most profitable.
- If you find your advisers difficult it might well mean you have very good advisers.
- Money isn’t everything but it’s still second to oxygen.
- One bird in the bank is worth about 10 birds in the bush.
