Reprinted in part from Farm Journal, December 2015.
Reassess, Dump Loser Assets
Smart farmers will survive the challenges that arise in 2016. Just as they’ve done in the past, they’ll reassess their spending and recognize cash is king. I also recommend the following:
Understand true cost of production. Account for every dollar. It’s how you’ll quantify whether you’re headed for profit, loss, or breakeven. Don’t overlook your true living expenses, including what you set aside for college and retirement. “Tis the year for living frugally.
Scrutinize every line item in your budget. It’s the only way you can stop haemorrhaging cash and become leaner. Is there a way to cut your overall costs? I challenge you to cut all expenses by 1%. It might seem small, but I’ve witnessed this exercise lead to six-figure savings. Question input costs and negotiate with suppliers.
Be sure to liquidate all non-productive assets. You can generate thousands of dollars by selling losers.
Stay in contact with your lender. They realise down cycles occur. The last thing you want to do in tough times is cut them off.
My comments: Just because an asset is no longer working in your operation, doesn’t necessarily mean it’s a ‘loser’ for everyone. Sometimes our goals change and someone else needs exactly what we no longer need. Of course, if the asset is junk, be sure to sell it that way.