3 Categories of Financial Health: Where does your ag operation sit?

Taking an honest look can help in the year ahead

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Now is the time to take a good look at where your operation stands, to determine the path you should take for 2020.  It doesn’t take a financial expert to tell you that businesses without plans have lesser chances of survival – in fact, 50 percent of businesses historically fail in the wake of a major disruption due to lack of planning.

K·Coe principal and ag consultant Peter Martin puts it into perspective, “As we ponder another decade and crop year, it’s wise to take inventory of where your operation truly sits.”

Using working capital (current assets minus current liabilities) as the basis of financial health, Martin puts growers into three categories –

    1. Struggling (negative working capital)
    2. Getting by (positive working capital)
    3. Well positioned (working capital equal to at least 33% of revenue)

This reality of your situation (no matter where you sit), he advises, should fuel action rather than complacency.  “Another year without a clear plan is another year wasted.  Take advantage of this precious time before planting to identify where your operation stands and where you go from here.”

In his Farm Journal column, Martin provides recommendations for considerations and actions for each category of financial health:  Which Bucket Defines You?

Making sound decisions on your farm or ranch is essential to healthy operations.  Contact a K·Coe advisor to formulate a survival or growth plan, make effective decisions, and create productive results.

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