Better Your Business With These 10 Steps
A business plan. Most farmers have them, if only because lenders often require them. Still, Curt Covington, a veteran banker and vice president of agriculture lending at Farmer Mac says a business plan provides producers a competitive advantage.
“Some of the softer side of having a business plan is to actually unify the organization and to help guide through some really tough business decisions,” Covington says. “I would say in terms of a strategic plan that allows you to define what your business and personal goals are, it allows you to achieve them. And in theory it will give you a competitive advantage in a business where there's not a lot of competitive advantage, particularly in the dairy sector.”
While it can be easy to get bogged down in theory and analysis, it’s critical to not only create the plan but to use it, Covington told dairy producers attending the 2018 MILK Business Conference.
“You can spend a lot of time planning and very little time doing,” he adds.
Here are 10 steps to create a plan and implement it:
1. Answer the key questions that drive your business. Where is this business headed? What do we want the business to look like in five years or 10 years?
“One of the really important things is to sit down with your family and the key stakeholders in your business,” he says. “Many are sitting here today and you’re in the transitional phase of life. What is your vision for that business, and I hate to say this, but they deserve to know if they don’t already know.”
Family members, employees, and business partners should know about the vision for your business.
2. What do you want your business to bring to your life? “When you deliver those financial statements to your banker, you have merged your personal assets with your business assets,” he says. “This business is your life and if you don’t convey what you want personally out of this business, you won’t get it.”
Align your personal vision with the company’s vision and get it in writing. Then weigh the vision with every business decision that you make.
3. Create an honest assessment of your business. Why is your business important? What do you do best? What are the areas you need to improve?
“There isn’t anyone in business that couldn’t determine an area in their business that they could do better,” he says.
Conduct a S.W.O.T. [Strengths, Weaknesses, Opportunities, Threats] analysis to help determine what the internal strengths and weaknesses of your business are that will help you take advantage of opportunities or avoid external threats.
4. Establish short-term milestones. These are mini goals. They are called SMART (specific, measurable, actionable, reasonable, timely). “For example, I want to cut un-necesseary expense by X%,” Covington explains. “There’s just expenses in your business you have to think long and hard about. If this expense went away today, would it materially impair my business?”
Stretch goals, but don’t guarantee failure. “The word best is a really bad word,” he warns. “Make achievable goals and build on them over five or 10 years.”
Don’t tie success to bonuses but to rewards, Covington recommends.
5. Layout a strategy to meet your milestones. If your goal is to reduce expenses, figure out where you can cut. “Your fixed costs are always the most expensive ones, but there isn’t jack you can do about those,” he says. “Think about variable input costs. Which ones can I effect today and that might mean changing from your favorite supplier that’s been overcharging you for years.”
6. Take action “Here’s where every plan falls apart,” he says. “Without action the first five steps don’t matter.”
Create a working document for your plan. Put some processes to your strategy. Be specific about what you are doing and when you will do it. Assign somebody to ensure the team stays accountable.
7. Result driven communication. Every communication with members of the team should support the business plan and be rooted in a specific goal. “Include how, where, when, why – every time you deliver instruction,” he says.
8. Review regularly and modify as needed. Covington recommends setting aside time on your calendar each month to review your plan. “It might not be every week, it might be every month,” he says.
9. Hold yourself accountable. Consider if you need a business coach or a mentor to stay accountable to the plan. “Most importantly, do not accept underperformance so easily,” he says.
10. Be adaptable. Develop a continuous improvement mindset, Covington says. “Agility is what will allow you to jump on new opportunities.”