General Farm Management & Strategy

The business model a farm uses when expanding the operation is not just limited to the traditional organic or internal growth model. Today’s environment provides opportunities to experiment with other business models.

Retained earnings, net farm income remaining after operator withdrawals, off-farm income, transfer of funds into the business, and debt financing can be used for farm growth. When using debt, is important to consider how risk is impacted by leverage.

When evaluating farm growth options, it is imperative that a farm evaluate the skills and competencies needed to grow. These skills are often more limiting than capital, and can become spread very thin.

When evaluating business venture opportunities, it is important to gauge the impacts of these options on strategic fit, expected returns and risk, capital structure, ease of entry and exit, value creation, and managerial requirements.

When evaluating growth options, it is important to identify key resources and capabilities, and to evaluate the business environment, and assess opportunities and threats. The idea is to use the farm’s key resources and strengths to pursue potential opportunities.

Farms have numerous options that can be explored when examining farm growth and downsizing decisions. When evaluating alternatives, it is important to gauge the impact of each alternative on net returns, risk, and the farm’s resource base.