Strategic thinking helps farm businesses make decisions by thinking ahead, visualizing potential problems, and finding solutions. It considers all possible scenarios and outcomes to find the best path forward, giving a competitive advantage and adding value to the farm. Strategic thinking offers an opportunity to assess the farm business and identify business strategies to help the farm reach its goals and be successful.
Why Strategies Matter
Business strategies are practical actions that show how a business plans to reach its goals. Strategies allow proactive management, help maintain control over the farm and determine if a business idea is feasible. Including fears and worries in the process helps prepare for tough decisions. A common tool used in this process is a SWOT analysis. It helps find strategies for a business by looking at strengths, weaknesses, opportunities, and threats.
SWOT Analysis
A SWOT analysis involves identifying strengths, weaknesses, opportunities, and threats. It helps develop strategies which can be made into goals and realistic actions to achieve them. This exercise can be done in one sitting or over time and should be revisited regularly.
Completing a SWOT analysis once a year helps keep the farm focused on its mission and vision. Some farms find it helpful to complete one every quarter especially if there are challenges or growth opportunities. Each farm should find the process that works best for them.
The exercise can be done for the whole farm or for specific issues or enterprises. A SWOT analysis is also useful for planning the farm’s future and succession strategies.
Who Should Be Involved
The leadership team, including owners, partners, and managers, should create the SWOT analysis. Stakeholders like consultants, lenders, and employees should provide feedback.
Steps in a SWOT Analysis
- Identify Internal Strengths and Weaknesses: The farm leadership team identifies strengths and weaknesses. Strengths give an advantage, while weaknesses limit what the farm can do. Gather feedback from people inside and outside the farm and compare the farm to industry benchmarks. Look at past performance and financial measures from the last five years.
- Recognize External Opportunities and Threats Gather information on the economy, input and commodity prices, regulations, industry trends, technology, consumer preferences, regulations, and competitors.
- Create Strategies or Action Steps: Use the SWOT analysis to create strategies that address opportunities and threats by leveraging strengths and minimizing weaknesses. Look for intersections of strengths, weaknesses, opportunities, and threats to maximize potential and mitigate risk.
Examples of Strategies
- Opportunity – Strength Strategy: Use strong relationships to market a specialized product like locally raised beef directly to consumers.
- Opportunity – Weakness Strategy: Improve internal communication to support farm expansion goals.
- Threat – Strength Strategy: Enhance HR practices to retain employees in a tight labor market.
- Threat – Weakness Strategy: Diversify income streams to mitigate low commodity prices.
Next Steps
How do you incorporate these newly identified strategies into your business plan and operations? Make it actionable by creating goals for each strategy with steps to achieve them.
A comprehensive SWOT analysis helps a farm respond to opportunities and threats by taking advantage of their strengths and weaknesses. Developing realistic strategies and goals helps the farm adapt and make proactive decisions.
