BUSINESS SUCCESS: WHAT FACTORS REALLY MATTER?



ten-year planning horizon. The intent of the FARM Assistance program is to enhance the
capacity of agricultural decision makers to make informed choices of risk management strategies
for long-term survival and profitability.

While the FARM Assistance program is relatively new, over 400 individual producer
analyses have been completed across the state from 1998 to 2002. The program has been able to
help producers add to their bottom lines by analyzing the impacts of alternative management
plans before the plans are implemented. The resulting database of primary data collected from
producers is a rich source of data to use to uncover the most important factors for business
success. Data collected through the FARM Assistance program includes an extensive list of
input parameters representing crop and livestock production, size of operation, land lease
arrangements, cost of production, asset values, debt structure, farm program information, crop
insurance information, and non-farm income and expenses. In addition to this empirical data,
extension risk management specialists have observed management styles and traits of the
producers that participate in the program. These input parameters define an operation’s current
financial performance and position, as well as the framework for projected performance.

The FARM Assistance program projects the financial performance and position of an
operation ten years into the future. Obviously, there are operations that project to be profitable
and improve their equity position over time, as well as unprofitable operations that lose equity
into the future. Of particular interest is identifying current observable factors that are most
relevant in predicting future success. The first step in this process is defining future success.
For the purpose of this study an arbitrary success index was developed and each of 375 farms is
assigned a success index value. In general a successful farm or ranch operation is one that
generates profit and improves its real net worth position. Another achievement of successful
operations is the ability to maintain a healthy cash flow position mitigating liquidity risk. Each



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