Take stock of the farm every year

July 26, 2007

Many large businesses conduct a SWOT analysis to identify the strengths, weaknesses, opportunities and threats of the business in order to keep pace with the competition.

You may not consider yourself a large corporation, but completing a regular SWOT analysis of your farm or agricultural business can be beneficial to keep you competitive.

It may sound like a difficult task to complete, but it does not have to be. The following paragraphs help explain what a SWOT analysis involves and how to complete this process.

Internal

The first two sections of the SWOT analysis usually examine the internal workings of your farm business. These issues or items are usually within the control of the business owners.

One example could be future management of the business. Is there a next generation owner/manager that has the interest in the dairy and the capacity to manage the complexities of the business?

Another example could be the financial position of the business. Does the farm business have too much debt held as short term?

Strengths

Below are some sample questions that can be asked to assist in determining your business’ strengths and weaknesses.

What strengths does your business have that make you competitive? Examples might include family, labor, machinery, size or milk production.

What do you do better than anyone else does? Are you a better marketer? Are you a well-respected employer? Are you able to complete planting and harvesting duties efficiently? Are you able to produce milk at a lower cost than others?

Weaknesses

What could you improve? How can you become more efficient? What little changes might make big impacts?

What should you avoid? Have you completed a financial analysis of your business to evaluate enterprises?

What do your competitors do better than you? You can work to be better than the competition, but in some cases you may be better off to fulfill a need they are not meeting.

The second part of the SWOT analysis requires you to look outside your business at issues that you cannot control, but can manage to enhance or reduce impact on your business.

An example for a dairy producer could be the development of the neighboring farm into single-family housing units.

Opportunities

Below are some sample questions that can be asked to assist in determining opportunities and threats to your business.

What trends are facing your business? Will you have to increase in size to remain competitive or can you remain at your present size?

What opportunities are available? Is there a niche market?

What is happening in your community that can be advantageous? Are there opportunities to raise heifers for others?

Threats

What obstacles do you face?

What are other dairy farmers doing?

Do changes in technology threaten your business? Does your financial position threaten your business? Could any particular weakness seriously threaten your farm?

Generally speaking, the people most directly involved with the business should participate. This would include family members employed in the business and hired employees.

Input from outside advisers, such as your attorney, banker, Extension educator or accountant may also be helpful as they may see your farm from a different perspective.

Involving spouses, even if they are not employed in the business, for their opinions and perspective is critical. They may provide a different view and help the business achieve its goals.

Intentionally not involving spouses can do more harm to the family and the business.

Strategy

Completing a SWOT analysis of your farm business is the first step in strategic planning. The process should help you identify areas where your strengths and opportunities align with a high probability of success.

Conversely, you will also identify combinations of weaknesses and threats. Your strategic plan should avoid these areas or at least provide for methods to minimize their effects on the farm business.

The SWOT analysis is not something you do one time and place on a shelf to collect dust. At least once a year, complete a new analysis.

You may find little change has occurred, but it is still a good idea to review achievements, measure production efficiencies and evaluate alternatives.