DairyCo

Strategic

Business goals and strategic planning

Defining and reviewing personal and business goals is essential in planning for the future. Often farmers have an idea of how they want their business to develop but may lack necessary management and planning skills.

In order for desired changes to occur it is vital that effective plans are prepared to put the new ideas into place and that some sort of timetable is set, with regular reviews to allow for unforeseen problems and necessary adjustments.

It may be necessary when developing a business that external skills are needed to help with the changes that may need to be made. If so, consideration should be made about employing a consultant or looking for free business advice in areas where these skills are lacking.

Strategic business analysis

One easily-understood and well-used means of measuring a business's current status is a SWOT analysis. The SWOT analysis involves looking at the strengths and weaknesses of a business, and any opportunities and threats it has.

Once these are identified, it is possible to assess how to capitalise on the strengths, minimise the effects of the weaknesses, make the most of any opportunities and reduce the impact of any threats.

A SWOT analysis can provide a clear basis for examining the performance and prospects of the business by assessing its resources and limitations. It can also be used as part of a regular review process or in preparation for raising finance or bringing-in consultants.

By assessing business and personal aims on a whole farm basis, it can highlight performance levels in several areas:

• Physical performance - how well a business performs through milk production or calf, heifer and cull cow sales, in addition to other physical performance measures such as herd fertility and milk hygiene, the relative importance of which will vary from farmer to farmer.
• Financial performance - how the business is financed: how stable, viable and profitable it is, its income, gross margins and cash flow, and how it compares with similar businesses.
• Products and marketing - whether a farmer is happy to sell milk in bulk or to consider further processing and marketing to improve profitability and control of the product, or to move into different markets, improve pedigrees and quality of livestock, try new agricultural enterprises or to diversify completely.
• Operational issues - assessing herd size, the farm premises, the systems used; such as calving systems, methods, machinery and technologies used, and parlour and milking routines.
• People management - measuring reliance on unpaid family labour, recruiting staff, the skills currently found on the farm as well as those required; any training and development needs, and the importance of keeping staff happy and motivated.
• Personal, lifestyle and family issues - perhaps the most important issue, assessing an individual farmer's work:life balance and that of the spouse or partner, and also defining family commitments. Also important are succession issues; the value of personal, community and business 'prestige', and the relative importance of environmental issues to an individual farmer.

The results of the SWOT analysis may help to identify the options and changes that can be made to improve the viability of the farm, or prepare the business for future changes such as planning for a son or daughter to enter the business.

The SWOT analysis, in conjunction with partial budgeting, projected gross margin calculations and cash flow forecasting, may also be useful in evaluating the potential of any new or diversified enterprises or the purchase of new machinery and equipment, or to evaluate the impact of a significant change to the business, such as an increase in herd size, the acquisition of more land, the formation of a share farming agreement or a partnership; or employing contractors instead of owning and using machinery.