Author: Scott Anderson

[vc_row][vc_column][vc_column_text]Keep your operation alive by holding onto your money

 

Capital is the lifeblood of business.

A business can’t grow without access to capital through debt and equity. Most farms grow and prosper through partnerships with banks and their own wealth, built up over time.

Use these five strategies to improve your working capital position on the farm.

1) Eliminate nonproductive assets

A word of advice:

If you haven’t used it in two years, sell it, rent it out, or scrap it.

Farmers are often guilty of collecting junk. That’s not a good business decision.

Turn everything you don’t use regularly into cash. Cash is way more valuable than junk, as we’ve talked about in the past (“Farm Finance, Cash Is King”)

2) Refinance any debt to improve interest rates or terms

Interest rates are really good right now. If you have 10 years left on a land loan, you may want to go to your bank to refinance it into a 30-year deal at a better rate.

Banks are always looking for good places to park money, and land debt is relatively low-risk. If you can refinance or “re-term” your mortgage on your land or house, that’s a great way to get extra money.

Also, if you’re buying any equipment or small pieces of land up to $300,000, you can do really nice loans with the government and get crazy-good rates. I just bought some farmland at 2.25% interest over 40 years. That cash flow is really nice, to say the least.

Try to refinance to get your terms down so your annual cost of capital is as low as possible.

3) Invest excess cash into productive assets

This is what I learned from studying Warren Buffett: capital allocation is what grows your business and net worth.

So many farmers tell me, “I didn’t sell my grain last July because I didn’t need the money.” But if you’re basing your business decisions on whether or not you need the money, you should find another occupation. Running a business is not for you.

It’s not about whether you need the money: it’s about the best decision to make for your business. Yeah, you’ll have a big tax income liability, but you’ll also have tons of dry powder in cash to buy things when there’s an opportunity.

Say you made a million dollars last year and you had to pay $400,000 in income tax . . . that’s a good problem to have. Now you’ve got $600,000+ in your after-tax cash.

If somebody next door is having a problem and offers to sell you ¼ land right next to you in exchange for $500,000 because they’re struggling, it’s a done deal. You write the check and acquire the land for half market price, because you can. Quickly use cash then refinance that land to get your cash back. The enemy won’t wait for you to load your guns.  You must enter battle with a loaded gun. Think about that: huge opportunities come to those who are prepared.  There is no luck, there only preparation and patience.

I recommend that everyone read The Richest Man in Babylon. It’s one of my favorite books of all time because it’s all about making your money work for you.

The rule from that book is, 10% of all I earn is mine to keep. If you take the 10% and invest it, just like Buffett, you’ll see it snowball into huge amounts of wealth.

4) Use government programs to increase cash flow

I mentioned this in point #2 about refinancing, but there are also CSP, EQUIP, and CRP programs to consider.

If you’ve got a 100-acre field, and 10 of those acres are always wet or problematic, go ahead and turn that into a CRP program. You can probably collect anywhere from $80-150 a year per acre on that land, and you’re not wasting seed or fertilizer.

Use these programs wisely. I think the farm programs are some of the lowest-hanging fruit and great ways to increase little dividends.

Don’t be scared off by a bit of paperwork!

5) Stress test your fields and commodities

Stress test your fields and commodities to make sure you don’t have any leaks in your profit-producing assets.  A solid farm financial software such as your’s truly at Cash Cow Farmer will easily help you do this and track it for years to identify trends.

Here’s an example: my dad invented something called the Anderson opener about 35 years ago, and it kind of revolutionized the small grain market. Instead of using a box drill, spreading fertilizer, and putting seed it, he invented a way to do that all at once. It works extremely well for small grains, which led us to farm wheat.

We farmed wheat for a long time, and when I got back from New York later I stress tested the wheat and found that we were losing money (or barely making it) versus our alternative commodities.

I wanted to drop wheat, and dad was against it. But at the end of the day, he trusted me. We haven’t farmed wheat for four years, and our profit margins have risen hugely because we don’t have wheat sucking the profit away.

Wheat has gone from a low profit to a negative profit. Just about every one of our customers loses money when they farm wheat. Especially when looking at the past 12 months prices.

This example shows that stress testing your fields to make sure your field economics aren’t bringing your profits down, and then stress testing your commodities, is so important.

There are a handful of ways you track this:

• Pen and paper
• Spreadsheets
• A farm financial software program like Cash Cow

Cash Cow in particular will tell you how to alter your rotation to make sure you’re growing what the market is interested in consuming. You will know exactly what commodities and fields are making and losing money for you.

It’s nice to have a system in place to help you track and improve your farming decisions, rather than doing the same thing all year.

Conclusion

Don’t get stuck in the same old program your dad or grandad did. Farming’s different; it’s dynamic, constantly changing; it’s not like it used to be, where you make money if you just work hard.

Today, you’ve got to run your farm like a Fortune 500 company. You’ve got to crunch numbers, analyze things—there’s a lot of extra work for farm managers nowadays.

You don’t have to be overwhelmed by that work, though. Follow these steps and use the tools and resources available to you, and watch your working capital grow and stay constant.

If you like listening as much or more as reading, you can check out this episode and lots of others like it by subscribing to the show on iTunes.[/vc_column_text][vc_column_text][smart_track_player url=”http://traffic.libsyn.com/cashcowfarmer/5_Ways_to_Preserve_Working_Capital_Master.mp3″ title=”31: 5 Ways to Preserve Working Capital” color=”18ad62″ social=”true” social_twitter=”true” social_facebook=”true” social_linkedin=”true” social_email=”true” ][/vc_column_text][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”40″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”40″ screen_tablet_spacer_size=”30″ screen_mobile_spacer_size=”20″][/vc_column][/vc_row][vc_row dfd_row_config=”full_width_content” dfd_row_parallax=”off” dfd_row_responsive_enable=”off” dfd_enable_overlay=”off” css=”.vc_custom_1470889834038{background-color: #2d2d2d !important;}”][vc_column width=”3/4″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”0″ screen_tablet_spacer_size=”0″ screen_mobile_spacer_size=”0″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”25″ screen_tablet_spacer_size=”15″ screen_mobile_spacer_size=”10″][ultimate_heading heading_type=”customizable” heading_tag=”h3″ heading_content=”MAXIMIZE PROFITS WITH CASHCOW FARMER!” main_heading_default_weight=”400″ main_heading_color=”#ffffff” subheading_type=”customizable” subheading_tag=”h5″ sub_heading_default_weight=”400″] Powerful Farm Financial Software That Is Affordable & Easy to Use![/ultimate_heading][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”25″ screen_tablet_spacer_size=”15″ screen_mobile_spacer_size=”10″][/vc_column][vc_column width=”1/4″ column_responsive_mobile_classes=”dfd-remove-right-padding” column_responsive_mobile_resolutions=”dfd-apply-mobile” css=”.vc_custom_1470810100672{padding-right: 2% !important;}”][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”15″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”0″ screen_tablet_spacer_size=”0″ screen_mobile_spacer_size=”0″][bt_animation animation_type=”_flipX” duration=”2″ repeat=”2″ allow_margins=”yes” scroll_offset=”5px” no_hide=”yes”][ult_buttons btn_title=” FREE 30 DAY TRIAL” btn_link=”url:https%3A%2F%2Fcashcowfarmer.clickfunnels.com%2Foptin8619204%20||target:%20_blank” btn_align=”ubtn-center” btn_size=”ubtn-large” btn_title_color=”#ffffff” btn_bg_color=”#00ab61″ btn_hover=”ubtn-fade-bg” btn_bg_color_hover=”#ffffff” btn_title_color_hover=”#00ab61″ btn_icon_pos=”ubtn-sep-icon-at-left” btn_border_style=”solid” btn_color_border=”#ffffff” btn_color_border_hover=”#00ab61″ btn_border_size=”2″ btn_font_size=”18″][/bt_animation][vc_column_text]

NO CREDIT CARD REQUIRED. START TODAY!

[/vc_column_text][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”10″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”10″ screen_tablet_spacer_size=”10″ screen_mobile_spacer_size=”10″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”15″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”15″ screen_tablet_spacer_size=”10″ screen_mobile_spacer_size=”10″][/vc_column][/vc_row]

[vc_row][vc_column][vc_column_text]Developing a structured daily plan is the key to achieving goals

When I lived in New York City, I had dinner with a friend at the Harvard Club and we were working on my goals.

My friend said, “Scott, figure out where you want to be in five years, then think backwards.” His advice was to set a long-term goal then reverse the steps, determining what I could do today and next week and the next to incrementally achieve that goal.

Last week we went over how to set smart goals. This week we will build what I like to call goal trees in order to build and maintain momentum in achieving our “Health, Wealth, Love, and Happiness” goals.

The success rate with goal trees is very high; adding a coach into the mix who keeps you accountable makes it even higher.

Let’s take a look at what the goal tree strategy looks like.

How to Create a Goal Tree

The first step is to build your dream life five years from now. It’s best to go out 10 years or more, but if you’re new to goal-setting, start off at five years out for now. Even still, get out of your comfort zone and dream a little here.

Remember the principles of SMART Goals apply here and with all branches of the goal tree: these goals need to be Specific, Measureable, Attainable, Realistic, and Timely.

The long-term goals are the treetops. You’ll be building branches backwards down to things you can be doing today and tomorrow to start climbing up the tree.

Example:

Revenue goals are the easiest measurable goals to do this with. At Cash Cow, we take our employees through the goal tree strategy.

For example, I’ve talked with my salesperson about his long-term goals. He lives in Denver and wants to buy a house there. In order to buy a house, he has to have a certain reliable income.

Here’s how he walked through the goal tree:

1. How much would he need to buy a house in his area?
2. What does he need to make per month based on that amount?
3. How many sales is that, based on his commission and salary?
4. How many demonstrations of the software does he have to do based on his close rate to achieve that commission?
5. How many calls per week and day were needed to achieve the desired amount of demos?

[/vc_column_text][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”30″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”30″ screen_tablet_spacer_size=”30″ screen_mobile_spacer_size=”30″][vc_single_image image=”15492″ img_size=”full” alignment=”center”][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”50″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”50″ screen_tablet_spacer_size=”50″ screen_mobile_spacer_size=”50″][vc_column_text]And so on, down to how many dials he has to make every day. Do you see how we’re working backwards here? You start with a financial goal, and you trace it down to an immediate action that will move you towards that goal.

Pro Tip

“Start with a financial goal, and trace it down to an immediate action that will move you towards that goal.”

He might have to make 250 dials a week, and it’s a frustrating job, but if he figures he makes $20 every time he dials based on his commission package, it gets a little easier. That’s much more motivating than saying I made 250 dials and got five people to talk with me.

His tree also has a branch that extends to me. I use his goal tree to see how many fresh leads I need to be developing so he can call and and develop those leads into customers.

Example:

It’s the same with the farm.

Let’s say that in five years you want to have a consistent $250k annual income.

What are you earning now off your farm/acres consistently? How many acres do you have to add, or how much more efficient can you be? What’s your grain marketing plan.[/vc_column_text][vc_column_text]Assess your efficiency and see what the realistic profit per acre is. If it’s $100/acre then increasing your farm size to 2,500 acres is part of the branches that hold up that treetop. You may also have side revenue silos that can add to that income level, such as doing custom work and/or cattle.

As always, the Cash Cow software is perfect for setting and achieving financial goals, because it gives you a clear reflection of the productivity value of each of your fields—crucial knowledge for figuring out how to be as efficient as possible.

The tree branches start to unfold once you have set the initial long-term treetop goal.

Conclusion
So many people just expect goals to achieve themselves, and they don’t want to do the work to make it happen. Take those brilliant words from the movie Pain & Gain to heart: “There’s doers then there’s don’ters. Don’t be a don’ter.”

There are unlimited resources on goal-setting across the Internet. Do a little research. Here’s a good place to start. Or for your farm financial goals, chat with us. We’d love to help.[/vc_column_text][vc_column_text][smart_track_player url=”http://traffic.libsyn.com/cashcowfarmer/Goal_Tree_Strategy_for_a_Successful_Farm_Business_Master.mp3″ title=”28: Goal Tree Strategy for a Successful Farm Business” color=”18ad62″ social=”true” social_twitter=”true” social_facebook=”true” social_linkedin=”true” social_email=”true” ][/vc_column_text][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”50″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”50″ screen_tablet_spacer_size=”50″ screen_mobile_spacer_size=”50″][/vc_column][/vc_row][vc_row dfd_row_config=”full_width_content” dfd_row_parallax=”off” dfd_row_responsive_enable=”off” dfd_enable_overlay=”off” css=”.vc_custom_1470889834038{background-color: #2d2d2d !important;}”][vc_column width=”3/4″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”0″ screen_tablet_spacer_size=”0″ screen_mobile_spacer_size=”0″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”0″ screen_tablet_spacer_size=”0″ screen_mobile_spacer_size=”0″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”0″ screen_tablet_spacer_size=”0″ screen_mobile_spacer_size=”0″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”25″ screen_tablet_spacer_size=”15″ screen_mobile_spacer_size=”10″][ultimate_heading heading_type=”customizable” heading_tag=”h3″ heading_content=”MAXIMIZE PROFITS WITH CASHCOW FARMER!” main_heading_default_weight=”400″ main_heading_color=”#ffffff” subheading_type=”customizable” subheading_tag=”h5″ sub_heading_default_weight=”400″] Powerful Farm Financial Software That Is Affordable & Easy to Use![/ultimate_heading][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”25″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”25″ screen_tablet_spacer_size=”15″ screen_mobile_spacer_size=”10″][/vc_column][vc_column width=”1/4″ column_responsive_mobile_classes=”dfd-remove-right-padding” column_responsive_mobile_resolutions=”dfd-apply-mobile” css=”.vc_custom_1470810100672{padding-right: 2% !important;}”][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”15″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”0″ screen_tablet_spacer_size=”0″ screen_mobile_spacer_size=”0″][bt_animation animation_type=”_flipX” duration=”2″ repeat=”2″ allow_margins=”yes” scroll_offset=”5px” no_hide=”yes”][ult_buttons btn_title=” FREE 30 DAY TRIAL” btn_link=”url:https%3A%2F%2Fcashcowfarmer.clickfunnels.com%2Foptin8619204%20||target:%20_blank” btn_align=”ubtn-center” btn_size=”ubtn-large” btn_title_color=”#ffffff” btn_bg_color=”#00ab61″ btn_hover=”ubtn-fade-bg” btn_bg_color_hover=”#ffffff” btn_title_color_hover=”#00ab61″ btn_icon_pos=”ubtn-sep-icon-at-left” btn_border_style=”solid” btn_color_border=”#ffffff” btn_color_border_hover=”#00ab61″ btn_border_size=”2″ btn_font_size=”18″][/bt_animation][vc_column_text]

NO CREDIT CARD REQUIRED. START TODAY!

[/vc_column_text][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”10″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”10″ screen_tablet_spacer_size=”10″ screen_mobile_spacer_size=”10″][dfd_spacer screen_wide_resolution=”1280″ screen_wide_spacer_size=”15″ screen_normal_resolution=”1024″ screen_tablet_resolution=”800″ screen_mobile_resolution=”480″ screen_normal_spacer_size=”15″ screen_tablet_spacer_size=”10″ screen_mobile_spacer_size=”10″][/vc_column][/vc_row]