Five questions to assess the financial health of your farm

Imagine a financially healthy, successful farming operation.

Is it comprised of leased or owned land? Does it stick to the same ol’ ideas and traditions? Does it struggle to keep staff?

Does it look like your farm?

Understanding the overall health of your farm is critical for the long-term success and growth. By self-assessing your operation, you can identify strengths and weaknesses, make informed decisions, and adapt to challenges.

Here’s how you can use five key questions to self-evaluate your farm.

• If the land I lease comes up for sale, could I buy it?

Buying your leased land can be a significant step in maintaining the growth of your operation. After all, if someone else buys it, it’s likely you’ll no longer have access to it, which decreases the size of your operation. But consider the big picture. When it comes to achieving sustainable, long-term success, does the purchase make sense?

Evaluate your financial health and determine if buying the land is a wise investment. Sometimes renting may be more economical than owning.

Ask yourself:

Does it align with my long-term plans? Consider whether the land purchase fits into your strategic goals and crop rotation requirements.

Is the rate of return high enough? Evaluate how much you could potentially get back from the investment.

Can I financially manage the purchase? Assess your financial health, debt servicing ability, and overall capital structure to determine if buying the land would hurt your financial health.

Can I manage more debt? Reflect on your ability to handle increased debt without jeopardizing your farm’s stability.