How am I doing now? This is one of the biggest questions we try to answer in financial planning. The next questions that follow are: Will your business make it? Will you be able to accomplish your personal goals while you cover your costs, generate the income you need to cover your expenses, pay your debts, and build equity in the long run? The evaluation process you use in your financial planning can be as sophisticated or simple as you like, and there are a wide range of helpful tools available. Module 5: Financial Planning of Planning for On-Farm Success presents the main financial planning tools:

  • Ratios to evaluate your financial performance
  • Break even tools to identify the balance between your production levels and your prices
  • Partial budgeting and return on investment (ROI) tools to make decisions about new business ideas or major purchases

Financial planning is all about using the numbers you’ve collected to help you run your farm. Whether you’re trying to figure out how your business is doing right now or you’re trying to evaluate whether you can afford to buy a tractor, financial planning will help you get there.