CHARACTERISTICS OF SUCCESSFUL FARMS AND RANCHESBY NATE FRANZEN, AGRI-BUSINESS DIVISION PRESIDENT

As we approach the Holiday Season, we have much to be thankful for. We are coming out of the great Ag super cycle that presented opportunities most of us never imagined possible. Times are changing. Margins are narrowing. In most of our territory we had bountiful yields that helped make up at least a portion of the loss in commodity prices. All that said, challenges are on the horizon. Times will be much more difficult than they have been. Our asset values are under pressure. Commodity prices are down. Machinery and equipment prices have softened, significantly in some instances. I totally expect land values to soften as we go forward as well. How much will depend on rising interest rates and the length of time we remain in low commodity price levels. Are you ready? To assist in your self assessment of your preparedness for tougher times ahead, we have prepared a list of characteristics we see leading producers exhibit.

1. Strong Accounting Practices and Financial Management. Top producers know their numbers. They have timely and strong financial record keeping practices. They provide accurate balance sheets, understand their historical profit and loss trends (not just for tax planning purposes), and budget for the future. They compare their budget to actual performance on a regular basis. Monthly is recommended. They communicate their financial position with other key stakeholders in the operation on a regular basis. Having it in your head is not good enough. What if something happens to you? Can others find what they need to go forward? Accurate enterprise analysis is a must. This is the process of allocating all costs by enterprise and equating that to accurate break even analysis. Accurate break evens are the foundation for a good marketing plan. With today’s technology, we are seeing top producers have this information at their fingertips real-time throughout the year. This should be your goal. I guarantee it will lead to better management and decision making. Another best practice we see paying big dividends is benchmarking. Do you compare your operation’s financial performance to others in the industry? Ask your First Dakota Ag Banker for your Ag Dashboard Report to learn more.2. Defined Marketing Plans. Great marketers have their plans defined and in writing. These plans address return on investment (ROI) goals which require detailed and accurate break even analysis. These plans typically set marketing goals based on price targets and timeframe targets. They factor in basis tracking and targets as well as forward pricing tools to be deployed. When it comes to marketing, emotion is not your friend. Don’t get caught up in trying to top the market or predict where the market is going. No one knows and if they say they do watch your checkbook. Set targets for acceptable returns and take action when the market gives you the opportunity. I truly believe marketing skills will be the difference in performance as we go forward.3. Strong Production Practices. The vast majority of agriculture is good at this. However, it is a must. Don’t get caught in the trap of making expense cuts that reduce production yield levels. This mistake is made often when prices decline.4. Acquire New Technology Based on Good ROI Analysis. Too often we see producers purchasing new technology because it is cool or because their neighbor has it. Technology should be acquired because it pays for itself in a rea-sonable period of time. Often times technology should pay for itself over a 3 to 5 year period or it becomes obsolete. 5. Annual Strategic Planning. Goal setting is key to success. It has proven true over and over, if you set goals and

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AGRIVISIONS®

NEWSLETTER

D e c e m b e r 2 0 1 5

FirstSource for news about First Dakota’s COMMITMENT TO AGRICULTURE

CHARACTERISTICS OF SUCCESSFUL FARMS AND RANCHES - CONTINUED...hold yourself accountable you will perform at a higher level. Ask your First Dakota Ag Banker for the fundamentals for good strategic planning.6. Communication Practices. High functioning operators are strong communicators. They have defined meetings to communicate with stakeholders and make them a priority.7. Human Resources (HR). It is a cliché, but it is so true. People make the difference. You must get the people part of your business right. Strong operations realize they need to provide careers not just jobs. They understand the difference between management and leadership and gravitate to leadership as often as possible. 8. Know How to Leverage Your Assets. There are productive assets and nonproductive assets. Productive assets produce income and nonproductive assets do not. Strong operators leverage productive assets and are very careful not to tie-up capital with unnecessary, nonproductive assets. Some examples of nonproductive assets include: houses, shops, boats, motor homes, vacation homes, etc. 9. Life Long Learning. Agriculture is a rapidly changing business very dependent on science and technological practices. Our markets are impacted by many things that happen around the world. To stay competitive you must always challenge yourself to stay sharp. You should have a training and education plan for yourself and your team.10. Leverage Big Data. There is so much data coming at producers these days. Top producers develop tools and systems to manage data real-time and leverage it to make better decisions. Keep it simple. Don’t get overwhelmed by all the information. Identify what is critical for your operation and track it.11. Top Producers want to be Held Accountable. High performing producers recognize they don’t know it all. They also realize they can’t do everything themselves. They want other opinions and recommendations. They want others questioning their thoughts and decisions with the common goal of constant improvement. 12. Advisory Groups and Peer Groups. One of the biggest best practices I see is the use of advisory groups and peer groups. Too often in agriculture we are so caught up in confidentiality that we don’t do this. That is a huge mistake. Surrounding yourself with others that can cover your weaknesses is a great practice. Peer groups can relate to your challenges and opportunities. Having a peer group that you trust and respect will make you better. Transparency by all is key to maximize effectiveness of advisory groups and peer groups. To drive home the point I’d like to share a true story. We have a client who has recently been diagnosed with terminal brain cancer. This producer has been a strong producer for years and has been a part of a peer group for a long time. Upon his diagnosis, he requested we engage our Keep Farmers Farming team to help him get his estate plan complete. We did. Then he shared a very powerful thing with me. At DakotaFest I asked him how he was doing. He stated he was doing well. He had peace of mind for two reasons. Our Keep Farmers Farming team had helped him get his estate plan in order. The operation will be transitioning to his son’s leadership. What he said next still gives me pause. He said the other reason he has peace of mind is the fact that when he is not around anymore to assist his son, he knows those members of his peer group will be. If that isn’t reason enough to have a peer group, I don’t know what is! I encourage all of you to consider these characteristics of Top Producers. If you are weak in any area or do not deploy any of these practices, make it your New Year’s resolution to do so. On behalf of our entire Ag Banking team I want to thank you for your business and wish you a Merry Christmas and blessed New Year.

Welcome Dakota State BankFirst Dakota is glad to announce the merger with Dakota State Bank in Blunt and Pierre. “We are delighted to add our presence in Pierre with the strong community banking staff of Dakota State Bank”, said Larry Ness, Chairman and CEO of First Dakota. “We look forward to serving the Blunt area and joining our teams in the Pierre market. We are confident we can play a role in the future success of these communities”, states Nate Franzen, Agri-Business Division President. The merger will be complete in January 1, 2016.

Congratulationsto our 2015 AgriVisions Beginning Farmer Program Graduates!

On December 4, thirty-six farmers and ranchers graduated from the 2015 Beginning Farmer program. The key objective of the AgriVisions Beginning Farmer Program is to educate and provide leadership to expand the oppor-tunities available in agriculture. By taking part in this program our graduates learned new skills, grew a stronger appreciation and understanding of the resources in Agriculture, made new friends, and realized they need to be life-long learners in Agriculture. Our next Beginning Farmer session will start in January 2017. More information available at FirstDakotaAg.com.

2016

®

AGRIVISIONS

featuring Dr. David Kohl Professor Emeritus, Department of Agricultural and Applied Economics, Virginia Tech

The great c o m m o d i t y

super cycle is in the rear view

mirror. The economic transition is in full gear. The

duration is unknown and will be very dependent upon global

and domestic economic variables. How does one position your business

to navigate the economic white waters and capitalize on opportunities that will arise? What

are key management and financial practices that will not only keep your business resilient but agile in these

times of economic uncertainty with a surprise around every corner? Come out to these lifelong learning events that will

offer tips and tidbits for your business, family, and personal lives.

Dr. David Kohl has hosted more than 6,000 workshops and seminars for various agricultural groups. He has published four books and 1,200 articles on

financial and business-related topics. He has received 11 major teaching awards.

Positioning for Reset

Join us for one of these sessionsTUESDAY, JANUARY 5, 2016Best Western Ramkota920 West Sioux AvenuePierre, SD

11:00AM - 11:30AM registration lunch provided12:30PM Dr. David Kohl

TUESDAY, JANUARY 5, 2016Mitchell Technical Institute Technology Center 1800 East SpruceMitchell, SD

6:30PM - 7:00PM registration 7:00PM Dr. David Kohlice cream social following

WEDNESDAY, JANUARY 6, 2016Best Western Kelly Inn1607 East Highway 50Yankton, SD

6:30PM - 7:00PM registration 7:00PM Dr. David Kohlice cream social following

Please call 800.657.5826 or 605.665.4904 to RSVP.

225 Cedar Street PO Box 156 Yankton, SD 57078

PRSRT STDUS POSTAGE

PAIDYankton SD

57078 Permit No. 16

ADDRESS SERVICE REQUESTED

First Dakota Convenient Locations In South Dakota… Beresford 605-763-2135Chamberlain 605-734-5555 Elk Point 605-356-0289 Kimball 605-778-6218 Mitchell (North) 605-996-3364 Mitchell (Norway) 605-996-3364 Oacoma 605-234-5005 Parkston 605-928-3077Pierre 605-224-5817 Salem 605-425-3111 Sioux Falls (Downtown) 605-333-8200Sioux Falls (Louise) 605-333-8295Sioux Falls (East) 605-333-8282Vermillion 605-624-5555Wagner 605-384-5456Yankton (Downtown) 605-665-7432Yankton (North) 605-665-4999

Loan Production Offices Columbus, NE 402-563-2326Corsica, SD 605-946-5888 Hastings, NE 402-463-4637 Ogallala, NE 308-284-3260 Platte, SD 605-337-2154Watertown, SD 605-753-5880

Growing American Farmers and RanchersSM

Introducing our newest Legacy Consultants

Keep FarmersFarmingA DIVISION OF FIRST DAKOTA NATIONAL BANK

Danci Baker was raised on a ranch in northwestern South Dakota near Meadow. She enjoys spending time on the ranch, working alongside her parents who are still actively raising cattle and sheep. She and her husband operate their own cow/calf operation on a portion of the family ranch. Danci’s motivation to continue improving the Agriculture industry was instilled by her parents’ and grandparents’ dedication and discipline. She hopes to pass that on her two children as they grow up enjoying this way of life. Danci is a graduate of South Dakota State University with an AgriBusiness major and Communications minor. Danci has over 11 years of Ag Finance experience, including home, acreage and rural community lending, as well as loan processing and servicing.

Danci knows the importance of being involved in her community and agriculture. She is currently the Queen Coordinator for the River Regional High School Rodeo and a graduate of SDARL (South Dakota Ag and Rural Leadership). With her diverse experience, Danci is ready to help you maximize the success of your operation and help you define your legacy.

Bryan Fransen grew up on a farm near Edgerton, Minnesota and currently resides on an acreage near Luverne. Bryan has an Associate Degree in Business Management. Prior to joining the Keep Farmers Farming Legacy team, Bryan was an account manager with Legend Seeds for over 7 years and worked for 8 years with Syngenta. Prior to that, Bryan managed an ag retail location for 21 years in southwest Minnesota.

Bryan knows the importance of being involved in his community and agriculture. He is

Danci Baker605.222.0516

Bryan Fransen507.227.1828

currently an elder with his church. Bryan understands agriculture and the diversity that goes with it. He is ready to help you get your business right so your family can survive and thrive. Together we can keep farmers farming and you can “write your perfect ending.”