What management practices and behaviours make farmers more financially successful?
“With the Dollars and Sense study we’re trying to determine what makes a leading farmer. How do they end up in the top 25% of farmers versus the bottom 25%?” explains Colin Siren, vice president of Ipsos Ag and Animal Health, in the video below.
The national survey included 604 farmers from all provinces and covered a full range of farm size and commodities. One of the key goals of the study was to establish a statistical link that proves there are key drivers of financial success, as well as specific best financial management practices that leading farmers utilize in their operation.
Return on Assets (ROA) was the leading driver of farm financial success identified by Siren and his team. In the study, top farmers had an average annual ROA of 10%, about 525% higher than the bottom 25% of farmers who averaged 1.6%. Farmers in the top 25% also had much stronger Asset Turnover scores (20% versus 9.7%, 100% higher) and Gross Margin Ratios (50% versus 19.6 %, 155% higher) than farmers in the bottom 25%.
Siren says the study clearly shows that key business practices also help farmers reach higher levels of financial success. Top farm managers are dedicated to continual learning, they carefully monitor and use their financial data, and are 30% more likely to consult business advisors. They are 50% more likely to have and follow a formal business plan, monitor and use their costs of production, assess and manage their risks, and have a sound financial plan that includes budget goals.
“Continual learning had the strongest statistical relationship of all the variables. That’s no surprise,” says Siren. “A farmer who is going to have a life-long commitment to development and learning is going to be a better farmer and a better business person as well.”
Investing in farm management does pay, says Siren. “The Dollars and Sense study really does identify key practices that when utilized by farmers are proven to have a significant farm financial impact.”
The full report, Dollars and Sense: Measuring the Tangible Impacts of Beneficial Business Practices on Canadian Farms, will be released on February 29 in Guelph, Ontario. Siren will present the full report at 9:00 am at the Holiday Inn, Guelph. If you’re interested in attending, RSVP to [email protected] by February 22, 2016. A webinar will also be available.