BY L E E P OT T S | Vice President / Senior Credit Officer
DO YOU KNOW YOUR BUSINESS IQ?
KEITH KNUDSENPRESIDENT/CEO | SECURITY BANK
Hard to believe we already have well over a month of 2020 behind us! It is definitely winter weather, but before we know it, field work will be gearing up. There are a lot of decisions to be made yet before that spring fieldwork starts, and a lot of things to think about and talk about with those with whom you do business. This month, our friend Dr. David Kohl has some good points to use as a self-evaluation in order to determine some areas of your operation to pay extra attention to in 2020.
FEBRUARY 2020 | #55-A
FINANCIALFOCUS
In the past few months, our lenders have had a chance to hear Dr. David Kohl speak about various aspects of the farm economy and what those things mean for your farm operation. In December, Secu-rity Bank hosted an ag confer-ence with Dr. Kohl as keynote speaker. Those that follow Dr.
Kohl know that he as some unique insights as he crisscrosses the country speaking with ag producers.
One thing Dr. Kohl talks about a lot lately is assess-ing one’s Business IQ. Before you get busy in the field, we encourage you to take some time to assess your own Business IQ using the following matrix pre-sented by Dr. Kohl.
ASSESSING YOUR FARM’S FINANCIAL MANAGEMENT CAN HELP YOU SURVIVE IN A TOUGH AG ECONOMY
Best Regards,
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BUSINESS IQ: MANAGEMENT FACTORS ... Continued
Business IQ : Management FactorsCritical Questions for Crucial Conversations
1. Knows cost of production
2. Knows cost of production of enterprise
3. Goals - business, family, & personal 4. Record keeping system
5. Projected cash flow
6. Financial sensitivity analysis
7. Understand financial ratios, break evens
8. Work with advisory team and lender
9. Marketing plan written and executed
10. Risk management plan executed
11. Modest lifestyle habits, family living budget
12. Written plan for improvement executed & strong people management
13. Transitional plan / Business Owner plan
14. Educational seminars / courses
15. Attitude
Written
Written
Written
Accrual
Written
Written
Written
Written
Yes
Yes
Yes
Yes
Yes
Yes
Yes
In head
In head
In head
Schedule F ( one & done)
In head
In head
In head
Sometimes
Sometimes
Sometimes
Sometimes
Sometimes
Working on plan
Sometimes
Reactive
No idea
No idea
No idea
No idea
No idea
No idea
No idea
Never
Never
Never
Non existent
Non existent
Non existent/controversy
Never attend
Indifferent
*Extra Points:• Progressive Business may receive 4 points for #2, 3, 7, 8, 14• Struggling Business attempting turnaround may receive 4 points for # 3, 5, 8, 11, 12
Customer Checklist Green (3-4 points*) Yellow (2 points) Red (1 point)
Score Overall Analysis
35-50 Strong management rating & viability
20-34 Moderate risk & viability; will most likey show previous refinanciing
<20 High risk & lack of long term viability
If you find that upon answering these questions, you discover that some of them may be in the “yellow” or “red” columns, that does not indicate any sort of failure. Rather, those are the areas in which it is not too late to begin working to improve upon. If you don’t know where to start on the road to improving in a certain area, our lenders are happy to help with that process. Knowing which areas to focus on can in turn lead to very specific goals being set to improve in such a way that several months down the road, this assessment can be filled out again and the score end up much higher. As a saying goes that we have lived by in ag lending, “That which gets measured gets man-aged; and that which gets managed gets done.”
As you know, with each passing year it becomes more and more important to implement sound business practices besides sound farming practices. How comfortable are you that each of these categories fall into a low risk range in your operation?
For most of the following questions, Dr. Kohl emphasizes that if one’s answer to any certain question falls into the “green” column, then that means there must be concrete proof of such. For example, if a producer answers question 9 as having a written marketing plan, then he or she needs to be able to produce that plan. Answer the questions below.
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