I've been aiding a few clients recently with developing written business plans for their current and future operations. At first, the task seemed daunting to them. Just the thought of writing is enough to make most people break into a cold sweat. However, once they got past the thought of writing and began to describe their current operation, the nerve-wracking task moved to a productive exercise in identifying the future direction of the business.
One section of a business plan that some people give little attention to is identifying an advisory team. An advisory team is a group of individuals who are advocates for the farm operation. The advisory team is a sounding board when you are considering making changes to your operation. The team you assemble should have differing backgrounds and experiences, and, most importantly, should be interested in seeing the farm operation succeed.
An advisory team can be a valuable resource for your farm operation. No one is an expert in everything; we each have strengths and weaknesses. The people you choose as advisors will have strengths in the areas you may lack in or care nothing about. As Warren Buffett once stated, "If you don’t know jewelry, know the jeweler."
A few months ago, I met a farmer at his accountant’s office. The farmer asked the accountant if he needed an LLC. The accountant began discussing the tax benefits of an LLC if it filed as an S corporation. I stopped the conversation and noted there is more to consider than just tax consequences when choosing a business entity. One should also consider the legal and management issues as well. The accountant and farmer agreed, so we first identified the goals of the farmer in order to best meet his needs.
An accountant’s expertise is in taxes and the farmer’s main goal is producing crops for a profit. I, on the other hand, attempt to look at the larger picture of the farming operation. With multiple advisors having differing experiences, a farmer is able to make an informed decision. An advisory board should not be confused with a board of directors. An advisory board has no authority over your operation. The members only provide advice that you can accept or not. Your board is there to share their knowledge and as Einstein said, "The only source of knowledge is experience."
In order to find the right individuals to serve as advisors, you should first consider the following:
What are your strengths and weaknesses?
What are your goals for your operation?
In what areas do you need guidance: management, human resources, taxes, legal, marketing, lending, agronomics issues, etc.?
What outcomes do you wish to accomplish from meeting with an advisory team?
Put your thoughts in writing so you can clearly articulate the desires you have for your business to an advisor. You may already hire consultants to assist in areas such as accounting, marketing, financial planning, crop scouting, nutrition, etc. Consider being with these professionals when you begin building your advisory team.
The composition of your advisory board will also change throughout the years depending on the stage of your business. If you are just starting out, you may need more assistance with identifying the enterprise you should focus on. In mid-career, you may need guidance on succession planning as your children come back to the farm. Later in life, you may need aid in making retirement plans.
Once you have an advisory team assembled, set a time to meet. You may want to meet quarterly or once a year. Realize time is valuable and to get the most out of your meeting you need to be prepared. Having an agenda for each meeting will help guide the discussion and respect your advisors’ time. Also, advice may require compensation. You may not have to write a check, but perhaps a nice meal or activity such as golf, hunting, etc. would be a nice gesture to reward your advisors for their commitment.
Realize changes aren’t going to happen overnight. Your advisory team may make recommendations you would like to carry out, but can’t implement immediately. You may have to say, just as Alan Jackson did, "Just be patient, I’m a work in progress."
Thomas Hall is an Extension Economist with the Alabama Cooperative Extension System. For more information about farm management and financial analysis, please contact your County Extension Coordinator or an Extension Specialist: North Alabama: Holt Hardin, 256-574-2143 or Robert Page, 256-528-7133; Central Alabama: Jamie Yeager, 334-624-4016; Southwest Alabama: Steve Brown, 251-867-7760; Southwest Alabama: Thomas Hall, 334-693-2010.
Editor's Note: The columnist for December's The Business of Farming was incorrectly attributed. "Get Organized, Go Digital" was written by Thomas Hall.
The items covered in this article are informational only and are not meant as tax, legal or financial advice; consult with your tax professional, lawyer or financial consultant for guidance on issues specific to your situation. The author does not endorse any websites, companies or applications, and cannot attest to the accuracy of the information provided by third-party sites or any other linked site.