PAXICO – The director of the Farm Analyst program at Kansas State University, Duane Hund works with farm families to help them determine how to make their businesses more profitable. For more than 30 years, Hund analyzed balance sheets and advised farmers and ranchers in Kansas on best practices, including the best way to pass the farm to the next generation and sometimes the least painful way to sell it.
"One of the most challenging parts of my job over the years has been to work with farm families in the aftermath of dealing with poor estate planning or the lack of putting a good plan in place when mom and dad were still here," Hund said in a release. "Some have lost farms because of poor planning. It’s really sad."
Along unpredictable weather and fluctuating commodity prices, farmers are experiencing the implications of trade disputes and coronavirus.
"Farmers sometimes feel beaten up by low prices and other factors," Hund said. "Knowledge is the basic that we need to sometimes retool. A farm business should budget from 0.5% to 2% of its annual gross revenue for continuing education, including seminars, newsletters, and community college or other classes. Hog and dairy farms are examples of operations that have had to rethink how they operate."
Hund came up with his "Eight Knows" for producers.
1) Know your resources.
2) Know your costs of production, including your return on investment.
3) Know your farm’s ability to pay its debt. Understand your cashflow.
4) Know your farm’s expense-to-income ratio. Make sure you analyze any increase in land or production.
5) Know how sensitive your business is to the effects of a decrease in revenue.
6) Know your family living expense. This includes health insurance. Cut expenses when you need to.
7) Know how competitive your operation is.
8) Know you are doing what you want to do.
"I’ve seen some average producers who are average marketers, but very good at controlling their expenses … they often really shine," Hund said. "Understanding what we can do with less if we need to is important. Maybe you can keep doing the same with the machinery that you already have or buy a used piece of equipment rather than a new one."