Navigating difficult times is not new to the swine industry. To survive, it takes strong leadership, strategic decisions and wisdom to foresee and forestall crisis, says Kent Bang of Compeer Financial.
“If you are not in survival mode you are either very lucky or have positioned yourself well in the past,” Bang says. “Great people, families and tremendous business leaders have built this industry. Working through the issues that we have been and are going through, will be a test of survival for most producers.”
Developing strategies and making decisions will continue to be challenging. As the financial challenges arise, Bang says managing working capital and equity levels or ratios may require the sale of some assets. Identify under-performing or under-utilized assets within your farm.
Here are six things to consider as you manage your farm’s financial picture.
1. Update your budget. Compare year-to-date budget to actual financial performance.
2. Understand the impact to your borrowing base if using one.
3. Understand the impact to working capital (current ratio) and equity (equity:assets).
4. Know your costs and manage capital spending.
5. Build a team of trusted advisors and consultants.
6. Communicate with your lender regularly.
Borrowing more capital may not be the best move for your business. Bang says some businesses will risk running out of available capital to fund operations.
“The most difficult decisions will be about downsizing if that is the best option for your business,” he adds. “Reducing the asset base can be an effective way of improving the financial picture while reducing the risk exposure.”
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