NW Call to Action
How to Create Your Dream Farm in 10 Years
What should you be doing with your capital? There are many different paths to take:
Nothing, save it up for a rainy day.
Upgrade equipment, the old stuff has a lot of hours.
Treat yourself, we shouldn’t work for nothing.
Buy depreciating assets, the tax man says we need a write-off.
Buy appreciating assets, they can grow wealth.
Upgrade the grain bin system, eventually it will pay for itself.
Payoff debt.
Expand the current business.
Branch out into a new business.
Buy life insurance.
Diversify in stocks.
The list goes on and on.
There is a right answer and a wrong answer. If you use capital to branch out into a new business opportunity, you are choosing to bypass any new land opportunities that come your way. If you upgrade equipment, the grain system must wait. This is called opportunity cost. You can’t have your cake and eat it too.
What is the right answer?
The answer to that question is a question: What are your long-term goals and what is your current situation?
You need to be absolutely certain of the direction you are driving your operation. If you want to be the largest landowner in the county, focus on that. If you want to create efficiencies to make the operation run smoothly, focus on that. If you want to be debt free and sleep better at night, focus on that.
Focus on The One Thing you are working towards and let that dictate the capital decisions you make today.
Farmers without long-term goals or a capital plan let random events and needs dictate how their capital is used.
Sometimes you must upgrade equipment to allow for more land to be purchased. Other times you may need to pass on the technology upgrade to preserve capital. Often it means bypassing personal pleasures for long term gain.
Every 6 months (or whenever a capital spending opportunity presents itself), reevaluate where your capital priorities need to be to help you achieve your operation’s long-term goals. This requires a strong understanding of your current financial position and a clear picture of what you are trying to achieve. Those with a clear eye on the prize and the discipline not to get distracted can reach their financials goals in 5-10 years while for others it can take over a lifetime.
Be in control of where your capital can take you.