Goals Without Accountability are Just Dreams – Why most business plans fail

Sometimes I feel like we are running in circles.

 

When I came back to public accounting in 2014, it was clear that primary producer agriculture was an industry that wasn’t keeping up with the times. Case and point, the largest issues on farms were succession, transition, overpriced land, and a lack of business fundamentals. Almost a decade later to the day, the largest issues are exactly the same. 

 

Notice an issue?

 

I have spent the last few months travelling North America and speaking to thousands of farms on every subject of primary producer ag. I have seen the internal financials and operations of hundreds of farms through our consulting division, insurance division, and coaching services. Why does the gap between the top farms and the bottom farms continue to widen? Why are some producers continually outperforming the rest when it comes to net profit, growth, and many other factors that create wealth? The answer is simple, they are accountable.

 

Now that you have rolled your eyes (because we all know the neighbours just had better luck or caught the rains last year), let’s have a frank discussion. 

 

In agriculture, we have consistently fought back against change, especially when it comes to acting like a business (or an evil corporation as the media likes to spin it). The main difference between a business and a lifestyle is the accountability that all members of the farm have. This goes from ownership to management, to employees, to the next generation. Without being accountable or responsible, we become complacent. 

 

Don’t believe me? Let’s dive a little deeper.

 

Succession and Transition

 

How many of you have completed a will? I ask this question when I do speaking engagements and the answer scares me – most of the time it is less than 50%. So, if we don’t even see the importance of a will, how much will we push towards a succession plan for the next generation? The term walk before you run might have to become crawl first. 

 

The act of sitting down and doing a succession plan is difficult. The ability to execute the plan and stick to the parameters can be downright impossible. 

 

Many plans were made because they were told they had to do it for the good of the farm. Put it down on the paper, stamp and approve it by all family members, and then put it up with the Ritchie brothers catalogue from five years ago. The cold truth is that most succession and transition plans have more dust than the floor of the old shop. So how do you make it so you don’t waste a whole bunch of resources on something you will never use? You set accountability.

 

Our farm does not operate like most. With non-family members and identified management in numerous areas of the operations, we always require accountability. Since family farms are all family, it is believed that everybody will row in the same direction. I have found the opposite is more often true, but because you are all family you believe things will turn out alright no matter what happens. 

 

This gives our farm a leg up on most operations, we must implement accountability not so our employees will work hard, but so as leaders and managers we are accountable for helping others achieve more. I didn’t see this tie until leaving public accounting. Before I relied on others, now others rely on me to make the right decisions. It is the ultimate accountability.

 

So how do you become accountable for transition? You hold yourself to delegation and leveraging responsibilities to the next generation. You train and educate those next in line so that when the time comes, they are ready. You hire people smarter than you so that you become less relevant. Lastly, you empower others and create internal systems that allow them to grow. And you do all these things by setting goals, timelines, visions, and values so that there is no forgetting the true purpose. And you stick to them.

 

Business Plans

 

Once a year Kristjan, Jeff (COO of Hebert Group), and I sit down to create the business plan for the coming year. Usually, it’s in November, and usually, it is after the harvest hangover has subsided and everybody is getting along again (and yes this happens on our farm just like yours). We spend a day locked in a room with whiteboards. We look back at what we achieved in the past, we look at what opportunities and threats are coming, and we assess our strengths and weaknesses right now. This allows us to create a plan for the coming year and make goals to keep each of us accountable for our aspects of that plan.

 

The act of making a business plan for most is a large undertaking. This is partially because we enjoy being “in” the business on the day-to-day and the thought of working “on” the business in a boardroom is not the norm. However, this first step then allows you to take the next hundred steps to become stronger as a farm. The first business plan is the hardest. Once you get that out of the way, the annual sessions are like clockwork. The meetings are off the farm (crucial), they are direct with an agenda, and we don’t leave until we have goals for the year and the next quarter. These are the parameters; the whiteboards are where the magic happens.

 

So how do you become accountable for a business plan? Well, transparency is the first step. Most farmers can tell you what their plan is the moment you ask, but that’s because it is in their heads. It is not real until it is written down (as the title says, it is a dream). For HGV, we have now moved further down the chain and our managers are part of these meetings. In early February we met without any family in the room, to decide what the plan was for HGV moving forward. No ownership means more transparency and less holding back. Then, we presented the plan to the primary family ownership and approved whatever items were strong. This is where we need to get to as an industry. Your farm team (whether just family or family and employees), is all on the same page, with accountability, and all tied to one common goal, success.

 

Where to Now?

 

A portion of the industry will fail. You can google the statistics of how many businesses fail every day, it is shocking. I believe that many of these primary producer operations will be those that choose to put their head in the sand. The historical and family ties in agriculture are strong, to the point that failure is often outranked by them. We believe that becoming a business will kill the lifestyle, or we believe that Grandpa never needed a plan or goals, and he was successful. You are correct, when the cost of production was $100 per acre and the price of grains was close to today’s amounts, he was successful. When land was $30,000 a quarter and combines were $50,000, he was successful. When the bread was less than $1 and a bottle of Coke was $0.05 he was successful. Today’s agriculture environment is high risk, high reward, and for this, those who fail to plan, fail to succeed. 

 

So, where do we start? Pen and paper, or a keyboard for the new generation. The business plan needs to be created, the succession plan needs to be drafted, and both need to be transparent with all parties involved, including advisors and non-farming family members. Then, we need to set goals. The statistics are easy:

 

Those that set goals have a success rate of 43%. Those who write their goals down have a success rate of 76%. You get to chose what to do with this information.