Farming Cycles (Driving Up Hill In Low Gear)

Ever feel like you are continuously slogging uphill in low gear and into a head wind?

Well, this is what many farmers are experiencing with this down cycle and while it may be character building the experience is less than pleasant.

Most farmers have been in this position before and could record their own useful points on what worked and what didn't work for them.

I have now been through eight of these cycles and here are some of my thoughts:

- Make sure you know more than your bank manager does about your financial affairs. Things tend to go better if you are calling your bank manager rather than the reverse. You will need to know his or her main line and cellphone number off by heart if your debt is substantial.

- Employer personalities range from the good, bad or ugly. In a down cycle even good employers can unconsciously slip into the ugly group. If you feel yourself doing this hold your feelings and temper even if things look ugly around you.

- Don't turn the light off when things go sour – never forget that profits need managing but losses manage themselves.

- Keep going to your children's netball and rugby. Many years ago I spent three years trouble shooting and going down farming couples driveways for banks and stock firms. This pull-back from attending family sports events, usually by Dad, was noticeable.

- If your spouse does not like the business plan then pause, reflect and regroup and work it through over a long weekend.

- You need to lead your team  and if everybody is not facing north with you then you need to know why. A downturn is a time for small steps and peace and harmony with the plan – save your wars until you are in profit and have options.

- Don't throw away those old diaries – sometimes key data, numbers, people and events can add value to a headache. Past decisions that worked well previously can have their place in a new down cycle.

- Your children's education cannot go up and down like your business cycles and needs to remain steady. There is nothing wrong with children having a $25,000 - $30,000 student loan upon completion of their education  and you can always help them repay it when your financial tide turns.

- Don't swear at your spouse, family and employees just because you are under financial pressure – people never forget being sworn at.

- Don't fight, don't argue and don't shout - negotiate instead. This is hard to do when you are annoyed but you are running a big business and don't downgrade it and yourself by blowing to bits like this.

- Leave your "iron disease" – vehicles and plant desires - in the dealer’s yard. Stop looking, thinking and talking about them.

- Listen to the crackerjacks in your sector and in a down cycle learn from their previous pain.

- Your accountants should actively be thinking about long term tax minimisation strategies, even in a loss year. Talk to them about it.

- At the moment with losses and deferred fertiliser expenditure being carried forward you won't be in the mood to think about income taxes because you won't be paying anything or little. However, when your financial tide turns these losses and tax control issues will be worth their weight in gold – many of you may pay no income tax for some years and this will speed up your recovery considerably.

- Historically the peaks and troughs of these cycles seem to be about five or six years apart yet at their bottom we struggle to see a way out.

- Complicated things in a down cycle tend to be trouble so try to keep them simple.

- Your honesty, integrity and sincerity are not for sale at any price regardless of where you are on your business cycle.

- Try not to wage war on more than one front at a time – even the strongest struggle with several wars going on at the same time.

- Generally the people and/or organisations in a down cycle which you will have financial problems with are those with weak balance sheets.

- Sometimes attack is the best defence. Sometimes silence is the best discussion. Sometimes defence is your only tool.

-  There is no halfway house with top advice.

- With financial hedging minimising your potential loss is more important than speculating for a potential profit.

- What does CFIMITYM mean in a severe business down cycle? It means cash flow is more important than your mother.

-  For every imprudent borrower there is an imprudent lender.

- Often the most boring parts of your business are the most profitable.

- Your biggest on farm risk is likely your marriage falling over.

- Be viewed in your community as a preferred employer.

- If you find your advisors are difficult it may mean you have good advisors.

- Avoid the articulate incompetent – they are around, they are smart and they are breeding.

- Money certainly isn't everything but it comes second after oxygen – keep close to your business engine room particularly when times are tough.

- Most people are better emotionally at buying than selling – but cutting your losses or maximising your profits at a certain point makes for good business decision making. Sometimes extricating from part of your business is absolutely the right decision.

- The optimist is wrong as often as the pessimist but the optimist recovers from a down cycle much more quickly.

- About 20 per cent of the people you deal with are against almost everything all of the time – deal with the other 80 per cent where possible.

- When you make a mistake do something about it straight away and remember it is not the mistake but the fixing of it that makes the difference and leaves the lasting impression.

- Unless you work in demolition don't burn your bridges and keep your options open for as long as you can.

- Be ruthless with money and gracious with people. Spend time on due diligence on key issues before spending your money.

- Never forget what Winston Churchill said: 'if you are going through hell – keep going'.

Pita Alexander is a specialist farm accountant at Alexanders.