There are so many things happening in agriculture today affecting the local farm gate for farm families. The impact of trade disputes, harvest woes, prices, input costs, tax management, estate planning, and the list can get even bigger.
As we head into another year (2019) items we might consider looking into could include: Building working capital, tax planning, 2019 cash flow projections, discussing economics of the farm with landowners, and acreage allocations for the coming year.
There can be more on your list, but there are also some first steps you can take to evaluate your operation over the past year? What went right? What went wrong? Are you more efficient at what you do? Is everyone involved in the operation happy? Are you happy? Has your balance sheet improved?
These are just a few questions you should be asking yourself in any type of ag-related business, large or small. And by conducting a SWOT analysis, you can more easily identify the Strengths, Weaknesses, Opportunities, and Threats that are key in keeping your operation competitive and profitable.
Even if you have a small farm, completing a regular SWOT analysis can be very beneficial. While it may sound like a difficult task to complete, with a few pointers outlined here, it doesn’t have to be.
The following information has been culled from the Ohio State University Fact Sheet, Conducting a SWOT Analysis of Your Agricultural Business, by Chris Zoller, Ohio State University Extension Educator, Tuscarawas County, and Chris Bruynis, Ohio State University Extension Educator, Ross County.
Let’s find out what is involved in a SWOT analysis and how to complete the process.
Strengths and Weaknesses
The first two sections of the SWOT analysis usually examine the internal workings of your farm business. These issues or items are usually within the control of the farm owners.
One example could be future management of the business. Is there a next generation owner/manager who has the interest in the business and the ability to manage its complexities?
Another example could be the financial position of the business: Does the farm hold too much short-term debt?
Here are some sample questions you can ask to assist in determining your businesses’ strengths and weaknesses.
• What strengths does your business have that make you competitive? Examples might include family, labor, machinery, size, etc.
• What do you do better than anyone else? Are you a better marketer? Are you a well-respected employer? Are you able to complete planting and harvesting duties efficiently?
• What do your customers see as your strengths? Ask them what they think.
• What could you improve? How can you become more efficient? What little changes might make big impacts?
• What should you avoid? Have you completed a financial analysis of your business to evaluate enterprises?
• What do your competitors do better than you? You can work to be better than the competition, but in some cases you may be better-off to fulfill a need they aren’t meeting.
Opportunities and Threats
The second part of the SWOT analysis requires you to look outside your business at issues that you cannot control but can manage to enhance or reduce their impact on your business.
An example for a livestock producer could be the threat of the neighboring farm being developed into single-family housing units. Here are some sample questions that can be asked to assist in determining opportunities and threats to your business.
• What trends are facing your business? Will you have to increase in size to remain competitive or can you remain at your present size?
• What opportunities are available? Are you near a large population area that would allow you to market your product? Is there a niche market available?
• What is happening in your community that can be advantageous? Are new livestock facilities coming to your area that could provide a new market for the crops you grow and sell? Is there an opportunity to market directly to local consumers?
• What obstacles do you face?
• What is your competition doing?
• Do changes in technology threaten your business?
• Does your financial position threaten your business? Could any particular weakness seriously threaten your farm?
Generally speaking, the people most directly involved with the business should participate in the SWOT analysis, including family members employed in the business as well as hired employees.
Input from outside advisors—like your attorney, banker, extension educator, or accountant—may also be helpful, as they may see your farm from a different perspective.
Depending on the type of farm you have, asking customers their opinions can prove useful, too. Asking spouses for their opinions and perspective — even if they are not involved in the business — is also critical.
Involving them can provide a different view that could then help the business achieve its goals. Intentionally excluding spouses can harm both the family and the business.
Completing a SWOT analysis of your farm business is the first step in strategic planning. The process should help you identify areas where your strengths and opportunities align with the highest probability of success.
Conversely, you will also identify combinations of weaknesses and threats. Your strategic plan should avoid these areas, or at least provide methods to minimize their effects on your business.
The SWOT analysis is not something you do once and then place on a shelf to collect dust. At least once a year, complete a new analysis.
While you may find little has changed, it is still a good idea to review achievements, measure production efficiencies, and evaluate alternatives.
Tony Nye is the state coordinator for the Ohio State University Extension Small Farm Program and has been an OSU Extension Educator for agriculture and natural resources for over 30 years, currently serving Clinton County and the Miami Valley EERA.