Jill Eberhart, Kennedy and Coe LLC

Transcription

1 Getting Ready for Growth Executive Women in Agriculture December 4, 2014 Copyright Kennedy and Coe, LLC 2014 Copyright All rights Kennedy reserved. and Coe, LLC 2014 All rights reserved. Jill Eberhart, Kennedy and Coe LLC Northeastern Colorado farm girl Colorado State University Bachelor of Science Twenty seven years in public accounting last eighteen with Kennedy and Coe, LLC focused on production agriculture and agribusiness Principal in

2 Key themes: The agricultural landscape is changing. How to position yourself? What to do before you grow. Are you capable of handling changes that may be required of you? Opportunities Changing Landscape of Agriculture The U.S. lost 90,000 farming operations in the last five years. Most of those farms weren t lost but consolidated. Large operations are going to get even larger AND THEY ARE DIFFERENT! 2

3 Changing Landscape of Agriculture In only 5 years, the proportion of total acres farmed by those with over 5,000 acres could increase from 25% to 36%. Virtually all the share would be lost by farms under 3,000 acres! Changing Landscape of Agriculture There will be significant transfer, change, and growth in the next five years as well. Are you prepared for change and ready to take advantage of opportunities that may materialize? 3

4 Ten Most Common Organizational Growing Pains 1. There aren t enough hours in the day 2. Too much time putting out fires 3. Don t know what others are doing 4. Don t know where the firm/operation is headed 5. Not enough good managers 6. I have to do it if it is to be done right 7. Meetings are a waste of time 8. Very little follow up on plans so things don t get done 9. Some feel insecure about their place 10. Sales are growing but profits aren t keeping pace Five Things Before You Add Acres Inadequate planning and organizational development will cause stress and growing pains. Before deciding to grow: 1. Know your current operation 2. Be true to your long term goals 3. Perform due diligence 4. Get Buy in 5. Have an integration plan 4

5 Know Your Current Operation Know your numbers What does it really cost to run your current operation? Have a handle on what you already have. Liquidity Do you have the cash? What more can you take on and still do a good job running the operation? Will you have the time and energy to work ON the business long term, not just IN the business? Be true to you long term goals Do you truly want to expand? Weigh risk tolerance and expected return. Run the numbers. What your return would be? Are you willing to spend the time and money for that rate of return? Alternate investment options? A decision to add acres needs to align with long term goals. 5

6 Perform due diligence Take steps to understand what you are buying. Get a clear picture of the financials. Hiring a professional to help with due diligence can help you avoid pitfalls and identify problems. Get Buy in You need buy in from your entire family and/or ownership group. Not being candid up front can waste a lot of time, effort and money. You could end up in a deal that not everyone is bought into. You also should have support from your banker and advisors. 6

7 Have an integration plan How you integrate those farms is critical. Understand both the differences and synergies. Conduct an analysis to identify how you can address weaknesses and threats while capitalizing on strengths and opportunities. Make sure you are communicating all along the way. Develop a professional business plan Stick to fundamentals and core values. Who do you want to be and do long term? What you need to do to change? Who is your management team? Align your partners. Make sure your operation can sustain without your involvement. 7

8 Large operators are different! They are lonely. They have different credit needs. Professional service needs may be higher. They need to move from entrepreneurial mode to a more professionalized operation. How to position yourself You must position yourself to take full advantage of growth opportunities. Be prepared to meet with lenders. Develop a professional business plan. Think like a CEO. 8

9 SWOT Analysis Strengths Weaknesses Opportunities Threats SWOT Analysis (Strengths) What your operation does well Internal in nature Examples: Newer machinery (less repair bills) Competent, diligent employees Data collection processes are streamlined and working well Inputs are used efficiently Fertile soil Good relationships with creditors 9

10 SWOT Analysis (Weakness) What your operation does not do well Internal in nature Examples: Newer machinery = more depreciation High interest cost Owners take too much cash out of the business Reporting processes are weak (lots of data, little information) Aging labor pool with fewer young folks wanting to work on farms SWOT Analysis (Opportunities) What are some of the external opportunities you see facing your business? Examples of external opportunities: New beneficial technology (GPS) Favorable input prices Favorable market conditions Falling interest rates Changes in consumer habits Are you in a position to take advantage of these opportunities? 10

11 SWOT Analysis (Threats) Examples of external threats: Unfavorable national policies or laws Unfavorable global policies or unrest More strict environmental laws Bad weather (local or in other markets) Input prices If these threats develop, will you be able to mitigate the effects? Think Like a CEO (Professional or Entrepreneurial) Key Result Professional Management Entrepreneurship Area Profit Profit orientation; profit as an explicit goal Profit as a by product Planning Formal systematic planning: Informal, ad hoc planning Strategic Planning Operational Planning Contingency Planning Organization Control Management Development Formal, explicit role descriptions that are mutually exclusive and exhaustive Formal, planned system of organizational control, including explicit objectives, targets, measures, evaluations, and awards Planned Mgmt. Development: Identification of requirements Design of Programs Source: Purdue University Center for Food and Agricultural Business Informal structure with overlapping and undefined responsibilities Partial, ad hoc control, seldom with formal measurement Ad hoc development, principally through on the job training 11

12 Think Like a CEO (Professional or Entrepreneurial) Key Result Professional Management Entrepreneurship Area Budgeting Management by standards and variances Budget not explicit; no followup on variances Innovation Orientation to incremental innovations; willingness to take calculated risks Orientation toward major innovations; willingness to take major risks Leadership Consultative or Participative Styles Styles varying from very directive to laissez faire Culture Well defined Loosely defined, family oriented culutre Source: Purdue University Center for Food and Agricultural Business Questions? Jill Eberhart eberhart@kcoe.com THANK YOU!!! 12