Welcome to the weekly edition of The Ag Globe Trotter by Dr. Dave Kohl.
In the last article, our discussion centered on a question posed to Dr. Ron Hanson, Professor Emeritus at the University of Nebraska, and I pertaining to the mistakes young producers often make. We discussed education, farm and ranch economics, and the older generation holding the decision-making cards too long. Let's continue exploring some of the mistakes that we often see young producers making.
Another huge mistake is made when the younger generation enters a rusted-out, worn-out and faded-out business. This type of business is one where the machinery and equipment lines are fully depreciated. The livestock and land are not productive, and management lacks proactive, effective practices.
The older generation will often indicate they were not handed the business on a silver platter and you cannot start out on top. However, this is a business decision, and overpaying for depleted or underperforming assets can be a slow financial death sentence in today's world of low margins and extreme volatility. A third-party business assessment can often prevent this mistake. It can also be a wake-up call for the older generation or for the children who are not involved in the business and are inheriting or receiving some compensation. Step back from the family situation and be objective. If you were purchasing a non-family business, you would seek candor and the same should apply for a farm and ranch business.
Another mistake often made by young producers is not investing in productive assets or the components that make you money. One very positive aspect of the new generation is that they are multitaskers with a wide variety of talents. They utilize their talents and skills to generate “side gig” revenue or multi-dimensional income. This can be threatening to the older generation who often think inside the box and linear. Skill and revenue assessment and potential are a very necessary part of a young member entering the business. Time management assessment is also crucial. Side gigs can take the focus away from the core business, family or personal time and lead to burnout over an extended period of time. So constant re-assessment is important.
Finally, being financially skillful is imperative. You must be knowledgeable of your own, your spouse’s and your partner’s credit reports. Having a gauge on business and personal budgets and knowing one’s breakeven points is critical for success. Betting on the next big thing or waiting for a homerun can lead to a strikeout.
A shout out to the FFA members that attended our meeting and for asking questions. Dr. Hanson and I would both enjoy lecturing to a class full of these engaged FFA members.
Dr. Kohl is Professor Emeritus of Agricultural Finance and Small Business Management and Entrepreneurship in the Department of Agricultural and Applied Economics at Virginia Polytechnic Institute and State University. Dr. Kohl has traveled over 8
million miles throughout his professional career and has conducted more than 6,000 workshops and seminars for agricultural groups such as bankers, Farm Credit, FSA and regulators, as well as producer and agribusiness groups. He has published four
books and over 1,300 articles on financial and business-related topics in journals, extension and other popular publications.
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