Remove Your Emotions and Know Your Numbers

Managing your farm business can be viewed of as the systematic process of continuous decisions. Making better decisions generally results in better business success. Seems simple enough, right?  Two areas of discussion today include checking your emotions at the door and knowing your numbers.

One key to helping you make better decisions is to try and remove or reduce your emotions in the decision-making process. For senior management and experienced business owners, this may seem second nature to you. For younger and usually less-experienced decision-makers, this can sometimes be more difficult. When emotions are checked at the decision-making door, better decisions can result by using sound financial analysis guided by wisdom (aka experience).

Things aren’t always black and white though.  Otherwise, decision-making would be easy. It’s all that blurriness that causes most decision-makers to pause before exploring any specific strategy. Generally, the bigger the decision, the longer the pause should be before moving forward.  Another key to helping make better decisions is to financially model the potential outcomes of various options resulting from any given decision. Not knowing the financial impact of a potential decision with a high level of certainty should create an even longer pause, if not outright abandonment.  Otherwise, what is the decision based upon?

"Business decision-making "by the numbers" is more systematic and reliable."

Our experience with business owners reveals that many owners and senior management don’t know the numbers of the business, say the cost of production.  As such, clarity in decision-making is diminished and “hope” becomes a more prominent decision-making tool than it should. 

The chant I have adopted -- “Know Your Numbers. Know Your Business.” -- was not chosen by accident. Financial analysis of past performance, understanding industry trends and using that information in modeling the future reduces uncertainty and increases your probability of achieving a desired outcome. When opportunities present themselves, financial modeling the future of various options removes some of that blurriness and provides you a better understanding of possible outcomes.