Agrimaster

The Difference Between Perpetual and Subscription

Posted on July 3rd, 2015 by agrimaster |

Perpetual Licence

Perpetual Licenced software is purchased and owned by you.

The purchase price of Perpetual Licenced software is usually higher than a Subscription or Annual Licence. A maintenance fee is associated with a Perpetual Licence to keep the software up to date and compliant.

If you choose not to pay the maintenance charge you can continue to use the software; but with the fast-paced world of software updates and technology, the software will soon be out of date, non-compliant and eventually stop working. The updates are not only governed by updating the features within the software program, but also the changes, enhancements and updates that third-party software vendors make that need to be incorporated into the software to ensure it continues to work; e.g. Microsoft updates.

Subscription or Annual Licence

Subscription or Annual Licence allows you to use the licenced software for 1 Year (or the term agreed). The maintenance fee is included in your Subscription/Annual licence. As long as you renew your Subscription/Annual Licence before expiry your software will always be up to date and compliant.

Agrimaster software is sold today as subscription software – we moved to this model in July 2013. The change was made to align our software offering with other accounting software packages as well as the most common industry standard. If the subscription is not renewed, you can access historical data within the software but nothing new can be added to the program until your subscription has been renewed.

If you purchased your Agrimaster software prior to July 2013 chances are that you have a perpetual licence – which means your software will continue to run and be updated and compliant as long as you pay your Membership fee (which is the maintenance fee). If your Membership fee lapses you should be able to use the software – but it will not be up to date with the latest update or compliant.

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CEO Sleepout – Sleeping out for homelessness

Posted on June 5th, 2015 by agrimaster |

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CEODavid Egerton-Warburton – Master Group CEO     

 

With over 100,000 Australians (including 12,000 children) experiencing homelessness, this could be a chance to help out.

For the 3rd year in a row, I will be participating in the Vinnies CEO Sleepout and I am aiming to raise $5,000 with your help.

Why do I volunteer each year and why I ask you to help?

First-time round I wanted to be a part of something, something that I didn’t know much about and something that has a direct effect on people. Like many of us, I avoided the homeless in the street, they made me feel uncomfortable. I never really understood why they couldn’t just find a job or register for the public housing; I always assumed they ended up on the street due to drug or alcohol problems.

Over the years, I have had the chance to listen to stories from regular middle-class Australians who had become homeless or who have teenage or adult children experiencing homelessness. My eyes were opened and my preconceptions about homelessness were blown out of the water.

So what did I learn from these stories?

  • A large number of Australian families are only 3 paychecks away from being homeless.
  • That the drug and alcohol problems usually occur after people become homeless as a way of coping.
  • Over 12,000 Children are homeless each night.
  • Homelessness can happen to anyone of us given a mix of circumstances.
  • It is hard to get social security if you have no fixed address.
  • When you become homeless you feel sub-human and feel you don’t deserve help.

So how did it change me?

I have changed my behavior in response to my new appreciation of the problem.

  • Each year I try to raise as much as I can for the Vinnies CEO Sleepout.
  • When I come across someone who is homeless, I will try and buy them something to eat or drink.
  • I will ask a homeless person their name (This help make them feel worthy).
  • I will introduce my children to them and encourage my three boys to talk to them and take them food.

So what would I like to ask from you?

  • Don’t be intimidated by the homeless, they are just regular people with a tough story.
  • When you see them say hi, ask them their name and ask if they would like something to eat or drink.
  • Please support me in my fundraising efforts, we are all very lucky. In a country as wealthy as ours, 100,000+ people, including 12,000 children should not be on the streets.

Thank you for your support, David.

donate to david

 

 

 

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M:drive Saves the Day!

Posted on March 20th, 2015 by agrimaster |

 

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Gone are the days of backing up to a disk; every Agrimaster Member/Subscriber has access to an on-line backup and restore service. It’s quick, safe and easy to use – it can even automatically back up your Agrimaster file every time you use Agrimaster – Don’t get caught out!

A Customer’s Story

Not being computer savvy, this new Agrimaster user was reluctant to learn, but knew it was a necessity to help run the family farm business.

To build confidence and make it all less terrifying; we helped the new user set up Asset Register and Stock Control within Agrimaster. The repetition of entering data and the familiarisation of the program helps and provides an enormous amount of confidence. This data can be more helpful than you think.

A brilliant, comprehensive job was done by this client of creating these registers, all of their private assets were also added; everything on the farm was listed and thoroughly recorded.

6 months later…

We received a call…..
We were greeted by a very confident Agrimaster user; thanking us for teaching her to set-up up the Asset and Stock control register. She was so incredibly relieved. One of the worst floods the region had ever seen just swept through her town. The farm was gone, they had lost everything; animals, crops and their home and contents.

Thanks to Agrimaster’s m:drive on-line backup service and restore service, not all was lost.

The temporary fix…

The users Agrimaster file was downloaded from m:drive onto a friends computer –  who is also an Agrimaster user. Now the Agrimaster user who lost everything was reunited with their financial history, assets and stock register which they desperately needed for the insurance claim. They had complete and accurate records of everything they owned.

Agriculture is a high risk industry, having access to your asset and stock information after a disaster is invaluable to move forward.

The lesson learnt…

All Agrimaster users should take advantage of the Asset Register and Stock Control feature in Agrimaster and utilise the on-line m:drive backup and restore service which is included in the Membership/Subscription.

Learn more about m:drive

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Profit not Passion will Feed the World

Posted on October 31st, 2014 by agrimaster |

 

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By David Egerton-Warburton

“I don’t farm for money/profit, I do this for the lifestyle because I love it.” Is often heard in farming circles when talking about profitability. This statement makes the assumption that the passion that drives you to run your farm business is mutually exclusive to the financial discipline required to make it a successful business.

This sentiment hints at a very important business driver; Purpose. Purpose, often referred to as passion, is one of the most important drivers in any business. It is the thing that gets you up in the morning, gives you focus, drives innovation and more importantly gives you the desire to keep going when all is going wrong. As essential as purpose is to your business it does not work alone and is only part of the achieving success in business.

I propose that a successful farm business is one that fulfils its core purpose of:

  • Growing food and fibre to supply the current needs of the world community.
  • Making a profit to meet the needs of the owners and employees.
  • Use profit to invest in increasing food production.

If you can picture your business as a journey then purpose is the destination or why – but it’s not the how. How is a more pragmatic beast.

If you say the purpose of a farm business is to feed the world community then one of the key components of how is profit.

Profit is the growth engine in any business – it allows your business to invest in the future by:

  • Investing in research and development to increase production and efficiency.
  • Invest in inputs to grow more food and fibre.
  • Invest in capital to increase production and reduce cost.
  • Invest in market research to respond to market need.

All the planning and effort you put into your business is ultimately measured in profit. Profit is the ultimate truth because it shows you are producing in response to the needs of the market, and the demands of the environment. Profit shows you are planning well and executing plans with discipline and flexibility. Profit says you are producing in response to what is needed and not in response to what you want.

Profit gives you the pragmatism required to stop passion ruining your business. E.g. Passion says “grow a 4 tonne wheat crop” profit says “there is more margin (profit) in a 3 tonne wheat crop.”

Profit is the long game. Profit is the pragmatism that says rather than going for broke each year in the hope of hitting the jackpot we will make a considered production and financial plan each year based on minimising risk and maximising margin, and invest our profit each year in education and technology, allowing us to grow more food and fibre whilst managing our risk or effecting our profit.

Profit is getting harder to achieve each year in farming, the risks are higher and the margins are thinner. This doesn’t mean that it shouldn’t be the focus of your business. It just means that the focus and time you need to put on this part of your business needs to be increased. With increased risk and tighter margins you need to:

  • Plan: Make focused and detailed financial plans – test all your production assumptions and plans financially. Make more than one plan in anticipation of more than one season or market.
  • Review: Review your production, market, financial position frequently.
  • Respond: Change the plans as often as required in response to the season and market.
  • Play: Play the long game.

See previous post: Why no plan (budget) survives contact with the real enemy

Therefore, if your purpose (passion) is to supply the world with more food, then it’s your responsibility to firstly focus on financial discipline and profit because only profit in business will give you the resources to invest in increasing food production.

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No plan (Budget) survives contact with the real enemy

Posted on October 24th, 2014 by agrimaster |

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By David Egerton-Warburton

Helmuth Karl Bernhard von Moltke (October 1800 – April 1891) would have made a great farmer.

Moltke was a German fields Marshall and the chief of staff for the Prussian Army for more than 30 years and is regarded as one of the great strategist of the 19th century.

Moltke main thesis was that any strategy must be seen as a system of options since only the start of a military campaign was plan able. His strategic thinking can best be summed up by his two main statements “No plan of operations extends with certainty beyond the first encounter with the enemy’s main strength” (or No plan survives contact with the enemy”) and “strategy is a system of expedients”

It is a mistake to think that Moltke did not plan because his plans would have to change. In contrast to this common assumption, Moltke made very detailed plans that took into account thousands of variables.

So why would he make a good farmer?

I wish I had a dollar for every farming client who told me that they don’t do a budget because it all changes anyway! The error in this thinking is that a plan/budget is a once off static document (something you do at the beginning of the year for the bank).

Farm business management is just like preparing for battle. You need to have clear knowledge of you current position; you need to have a clear objective; you need to know what available resources you have (Land, stock, machinery, labour, working capital etc…); you need to know your controllable risks and your uncontrollable risks (or Unknowns). Based on all of this information you make detailed production plans and equally detailed financial plans (Budgets) to “Ground Truth” your production plans. As all of your wins and losses will be measured not in production but in dollars!

Like Moltke your plans will not survive first contact with your enemy (weather, markets, break downs, health etc…). So you when planning for the battle at the beginning of this season I strongly encourage you to think through and make a number of alternate plans based on possible alternatives.

E.g. do a minimum of five budgets (Make one and copy it)

  1. Baseline budget – this is the most probable (the one you take to the bank)
  2. Bad year budget – e.g. late or low growing season rainfall, low prices
  3. Good year budget – e.g. early rain, high prices
  4. Half Budget/ Half Actual – a combination of your baseline budget with your monthly actuals imported into each moth as they are reconciled (see how your cash flow is going)
  5. Sand Box budget – this is where you play with scenarios (so you don’t stuff up your other plans)

The importance of this extra planning before the season (battle) starts properly is that your mind is clear and you will make better decisions as a result. In the heat of battle (e.g. seeding) your cortisol levels will be elevated and as a result your thinking will be slower and less effective. As a result big mistakes can be made.

So farm like Moltke went to war. Understand that “No plan survives first contact with the enemy” so make lots of them and change your plan as the conditions of the battle change!

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Farming Myth 3 – Farmers are here to feed the World.

Posted on October 3rd, 2014 by agrimaster |

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Farming Myth #3 – Farmers are here to feed the world
By David Egerton-Warburton

Your farm business isn’t a Not-for-profit organisation whose primary responsibility is to feed the world.

You run a Farm BUSINESS– the aim of a farm business is sell produce for greater than the cost of production to generate profit, that is then used to feed, house, clothe & educate your family. As a business you will attempt to grow as much produce as you can until; a) the cost of production is greater than the expected return; b) The financial risk (capital exposure) is disproportionate to the estimate return.

So what has this got to do with feeding the world you may ask? Nothing!

The agribusiness and non-agribusiness press is currently dominated by the couple of key themes in relation to agriculture.

1)      There is an impending world food crisis and farmers in Australia have to invest in lifting production by 30-50% by 2030 to feed the 9 billion people who are going to be living on the planet.
2)      There is a large and growing need for food and especially protein in Asia and that Australia can become the bread basket of Asia

The impending world hunger problem is very complex and it is not as simple as, too many people and not enough food. If that was the case then basic economics would solve the problem. If there is more demand for a product then there is supply then the price will rise. This will encourage the supplier (farmers) of this product to invest in producing more of it and for more people to enter the supply side of the market to profit from the increased prices.

If this was happening in Agriculture the current and future price of your commodities would be at an all-time high and we would be growing a lot more food than we are currently. You and the industry could then afford to fund research, increase inputs and invest in capital to grow more food. You do not need to be an economist to realise that this is not working. These pricing signals are being interrupted for many reasons. The key reason is that the people in the world who can afford food have too much and the people in the world who need food, can’t afford to buy it or afford the capital to grow it. So the world food supply problem is more geopolitical that agricultural.

The food bowl of Asia argument plays well in the press and gives people and unrealistic expectation of the future. To quote Agricultural Minister Barnaby Joyce:

“We feed right now … about 60 million people. If we doubled our production and fed 120 million people, we couldn’t even feed half of Indonesia, so let’s stop talking about how we’re going to feed the whole of Southeast Asia,” Mr Joyce told Sky News’s Australian Agenda.”

“What we do have is a premium product and, with the right supply chains, a premium product gets a premium price.”

“We’re not going to be the food basket of Asia. We’ve got to dispense with that rhetoric. It’s ridiculous.”

So what should you do?

Focus on growing food for profit only and don’t believe your own press. The agribusiness industry and government through the press and conference’s, has done a great job of building up the food crisis and the growing demand for food in Asia. The macro economic arguments for this are sound but the devil is in the detail.

As a farm business it is important to be aware of what is happening globally, but in order to run a sound business you need to focus on the NOW. That now is growing food for profit. (To rehash to old maxim: “Production is vanity – Profit is sanity”)

To solve the world food supply problem we need to first look at things like; access to capital for poor farmers; trade barriers; corruption; storage & transport infrastructure; preservation of farming land from urban encroachment; commodity pricing & trading mechanisms; to name few. As a result they are beyond your immediate influence as a farm business. So as a member of the world community you can get involved in government and not for profit organisations focused on elevating world hunger by solving these problems.

In practice, the world food supply problems will be solved by a mix of all farming types, styles and sizes globally.

As the manager of a higher input industrial scale farm business, your first responsibility is to your business and your family. Be pragmatic with your business investment decisions and focus on the fundamentals. If the world wants you to grow more food it will demand it in dollars. Then you will do what you do better than anyone else, grow lots of it!

Further reading on the world food problems:
“Bet the Farm: How Food Stopped Being Food” by Frederick Kaufman
“The Coming Famine: The Global Food Crisis and What We Can Do to Avoid It” by Julian Cribb

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Be Efficient with Electronic Document Management

Posted on September 19th, 2014 by agrimaster |

 

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Going paperless can save your business time and money. Yes you do need to keep your invoices and various other paperwork but you don’t have to keep it all filed in paper format.

More and more businesses are offering to invoice you electronically to save paper and reduce costs.electronic

When you receive invoices, statements and other business paperwork electronically you don’t’ have to print it out and file it, you have the option to file it electronically.

You can manage your electronic documents in 3 ways:

  1. Using folders in Windows
  2. Using folders in Email/Outlook
  3. Using a dedicated file management application

 

How to manage your electronic files in Windows:

windows  What types of electronic files should be saved?

Documents and data used for business purposes such as letters, emails, invoices, BAS and other compliance reports such as taxation returns, forms, policies, reports, spread sheets, presentations, photos, videos & audio files.
Files should be stored in structured folders, on a secure computer only accessible to people that need access to the files. Consider password protecting the computer if it is an open area.

• A shared folder structure can be created in C:/Users/Public/Public Documents – this is accessible to anyone who logs into an account on the computer.
• A private folder structure can be created in an account: C:/Users/Manager/Documents only accessible when logging into the ‘Manager’ account

 

How to manage your electronic files in Outlook:

Create a folder/s on your online file storage service such as Dropbox, Google, IDrive. When you save your attachments i.e. documents, photos – from your email messages use theirs storage services.

 

 

How to Manage your Electronic Files Using Application

Online File Storage Services
You can use an online storage and sharing service to store your electronic documents.

  • The main advantage of this is that all your documents are available to everyone in your business whether they are in the office or accessing the service remotely.
  • These services allow you to backup (sync) your electronic documents online.

dropbox Some examples of these services are:

 


Our recommendation would be to create folders to store documents online in the same way you would in windows and that you consider syncing your preferred online file storage service with the folders on your computer.

 

Backup your electronic files:

Backup of your files should be conducted regularly and kept in a secure location – ideally off-site. Other options for Backups are: a Partition Hard Drive, USB, External Hard Drives or Cloud Services.

Why is good electronic file management important?

  • Records can be accessed easily
  • Records are secure and backed up
  • Files are easy to find and up-to-date
  • Out-of-date files are archived
  • File space on computers is used appropriately
  • Standard file naming and storage practices are followed
  • Save money on paper, printing and stationary

How to manage your electronic files:

  1. Start afresh with a new and well planned folder structure to store files
  2. Create top-level folders according to functions/activities, rather than staff names
  3. Use relevant and clear titles
  4. Create sub-folders in each folder; grouping the files as part of a function
  5. Consider creating sub-folders for each year

Lastly, you may find this document from the ATO helpful: Electronic Invoices

 

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The Most Important Productivity Software in your Business – Your Mind.

Posted on September 12th, 2014 by agrimaster | Tagged with: > >

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Without a healthy mind everything in our life is harder, slower, more frustrating and sometimes dangerous. So in this age of technology we need to remember that the most important piece of software in our business and personal lives is not the latest productivity app but our minds.

A healthy mind will; reduce stress; increase productivity; improve safety; improve happiness; increase creativity and innovation; improve sleep; increase the quality of decisions; improve relationships; increase resilience and reduce physical illness! Who wouldn’t want this in their lives?

Today, at this very moment we are presented with more information and more opportunities than our minds can handle. We live in an environment of constant and accelerating change. This change is best illustrated by computer technology, between 1971 & 2011 the number of transistors on integrated circuits doubled approximately every two years. I.e. Computers get twice as powerful every two years. This equals the potential of twice the amount of calculations and an increased amount of data.

The problem with the speed of change is that our minds are not able to adapt as quickly and as a result we are seeing the rise of mental health issues related to the excessive consumption of activity and information in our lives. I see this as similarity to the obesity epidemic caused by the excessive consumption of sugar over the last 50 years.

I believe that mental health is the cornerstone of all health. It is the big rock. If you can get your mental health right your other health issue will be much easier to get under control.

So how do you do this?

I am not a mental health expert so I will not be giving you any advice. But I would like to recommend some really good resources to refer to.

Smiling Mind

Smiling Mind is modern meditation for young people & adults. It is a unique web and App-based program, designed to help bring balance to young lives. It is a not-for-profit initiative based on a process that provides a sense of clarity, calm and contentment.
See more at: http://smilingmind.com.au

Your Brain at Workby David Rock

Your brain at work explores issues such as:

  • Why our brains feel so taxed, and how to maximize our mental resources
  • Why it’s so hard to focus, and how to better manage distractions
  • How to maximize your chance of finding insights that can solve seemingly insurmountable problems
  • How to keep your cool in any situation, so that you can make the best decisions possible
  • How to collaborate more effectively with others
  • Why providing feedback is so difficult, and how to make it easier
  • How to be more effective at changing other people’s behaviour

Dymocks Book store
Amazon Books
Listen in the car or tractor: Audible Audio Books

The Power of LessBy Leo Babauta

With the countless distractions that come from every corner of a modern life, it’s amazing that we’re ever able to accomplish anything. The Power of Less demonstrates how to streamline your life by identifying the essential and eliminating the unnecessary – freeing you from everyday clutter and allowing you to focus on accomplishing the goals that can change your life for the better.

The Power of Less will show you how to:

  • Break any goal down into manageable tasks
  • Focus on only a few tasks at a time
  • Create new and productive habits
  • Hone your focus
  • Increase your efficiency.

By setting limits for yourself and making the most of the resources you already have, you’ll finally be able work less, work smarter, and focus on living the life that you deserve.

Audible
Amazon
Dymocks

Brain Rules – By John Madina

See how the brain works while using it in the process of reading this book! Most of us have no idea what’s really going on inside our heads. Yet brain scientists have uncovered details every business leader, parent, and teacher should know – like that physical activity boosts your brain power.

How do we learn? What exactly do sleep and stress do to our brains? Why is multi-tasking a myth? Why is it so easy to forget – and so important to repeat new information? Is it true that men and women have different brains?

In Brain Rules, Dr. John Medina, a molecular biologist, shares his lifelong interest in how the brain sciences might influence the way we teach our children and the way we work. In each chapter, he describes a brain rule – what scientists know for sure about how our brains work – and then offers transformative ideas for our daily lives.

Medina’s fascinating stories and sense of humour breathe life into brain science. You’ll learn why Michael Jordan was no good at baseball. You’ll peer over a surgeon’s shoulder as he proves that we have a Jennifer Aniston neuron. You’ll meet a boy who has an amazing memory for music but can’t tie his own shoes.

Amazon
Audible
Dymocks

Man Therapy:

Very funny and with an essential message for all men on dealing with stuff!
http://www.mantherapy.org.au/

What if it is all too much!

It is very important to recognise when you or someone you know is not coping.

How to ask Are you OK?
https://www.ruokday.com/resources-for-you/how-to-ask-r-u-ok/

If you or someone you know needs help pleasecontact:

1Life
http://www.mcsp.org.au/

Life Line: 13 11 14
http://www.lifeline.org.au/Get-Help/Facts—Information/Rural-Mental-Health/Rural-Mental-Health

Beyond Blue: 1300 22 4636
http://www.beyondblue.org.au/

 

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The F Myth 2 – Businesses Face uncontrollable risk

Posted on September 5th, 2014 by agrimaster | Tagged with: >

By David Egerton-Warburton.


Farm “Business faces uncontrollable risk”

You can control Farm Risk

How much control do you have over the risk your farm business is exposed to? The standard answer I get from most people is; None, Not many etc…   I propose that you actually have control over 90% of the risk your business faces on a week to week basis.

Last year I spent a couple of weeks presenting a session on financial risk management as part of the Grain & Graze ‘Optimising Farm Business Risk Workshops’ in the WA wheat belt. One of the stand out moments in these workshops is when participants are asked to list all the risks facing their farm business under the headings of PRICE, YIELD & COST.   Participants were then asked to mark each of these risks as either a RISK or an UNCERTAINTY. So what is the difference?

Risk is the potential that a chosen action or activity (including the choice of inaction) will lead to a loss (an undesirable outcome). The notion implies that a choice having an influence on the outcome sometimes exists (or existed). Potential losses themselves may also be called “risks”. Any human endeavour carries some risk, but some are much more risky than others. “Wikipedia, 2013

Uncertainty: The lack of certainty, a state of having limited knowledge where it is impossible to exactly describe the existing state, a future outcome, or more than one possible outcome. Wikipedia, 2013

i.e. Risk you can control, uncertainties you can’t

To the surprise of nearly all participants, very few of their items written down fell into the Uncertainty category usually only about 2-3 things out of 25 + items (About 8-9%)

This realisation gave everyone in the room a new perspective and made them realise how much control they did have. If they wanted to reduce the risk in their business they needed to focus on the 90% of real risks they can choose and control. E.g. you cannot manage global grain prices (Uncertainty) but you can control how and when you sell (Risk). You cannot control the weather (Uncertainty) but you can prepare both operational and financial plans for different weather patterns/events (Late Rain, Early Rain, No Rain) (Risk)

So how do you go about identifying and managing the risk on your farm?

Farm management is a large project management task akin to any industry. In fact I believe that most successful farm managers are natural project managers that would be welcome on any commercial project.

I am also a big fan of taking skills and practices that have been implemented successfully in one industry and applying them to another. In our software business we run a project risk register. This is a common practice in most well managed project teams, as project management and risk management are inseparable.

A risk register is a list of all the risks your business or project faces. Each risk is then categorised and sorted so that you can put in place actions (Countermeasures) to help mitigate your risk.

There is no set template for a risk register. They go from very complex (often used in big projects with large teams) to very simple.

Below is an example of a Risk register of moderate complexity.

Number Risk Owner Probability (Low, Medium, High) Severity (Low, Medium, High) Countermeasures Status (Red, Yellow, Green) Date Risk Type (Production, Financial, People)
1 Late Rain Bill Medium High
  1. Hold late season varieties in stock
  2. Build alternate financial forecast
  3. Conserve soil moisture
Green 12, Jan Production
2 Low Wheat price Jane Medium High
  1. Work out Break Even Point
  2. Develop hedging strategy to cover operating cost.
  3. Run higher stock numbers
Yellow 24, Feb Financial
3 Labour shortages at peak times Jane Low Medium
  1. Contract out some operations
  2. Investigate 467 visas
  3. Invest in larger equipment
yellow 18, Feb People
4 Frost Bill Medium High
  1. Take out insurance
  2. Stagger planning
Green 24 Mar Production

 

A simpler example is just based on colour, a list rated from Red to Green based on the level of risk you perceive it to be. You can use a register like this on a wall in your office as a way of discussing risks before deciding on countermeasures. We use this in our team meetings and it works well with post-it notes.

e.g. Most farm managers are very aware of the risks they face and the measures they need to make to manage them. These risks tend to be a burden that are carried by all managers regardless of experience or ability.

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Running a risk register will help you in a number of ways:

  1. It helps you clearly identify manageable RISKS vs. UN-CERTAINTIES
  2. It will help you get more than one mind on the job and therefore have a better chance of identifying all the risk you face.
  3. It externalises the risk (gets it out of your head) and makes it a shared responsibility and a visible manageable issue (Reduces the burden)
  4. It gives you peace of mind knowing that you have a known list of countermeasures in place to mitigate the risk you face.
  5. Helps you deal with the risk early on in a season when you are thinking clearly.

One of the main lessons I have learnt over the years is that success and happiness is built around focusing on the things you can control and accepting the things you can’t.

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The F Myth

Posted on August 12th, 2014 by agrimaster | Tagged with: > >

By David Egerton-Warburton

From 2014 and beyond; the success of a farm business will have little to do with the farmer’s technical expertise in crop production and animal husbandry. It will be based on their ability to establish efficient business systems and manage a limited pool of risk capital to generate profit.

The F Myth or ‘Farming Myth’ is the myth that great technical ability in production will make for a successful farm business. But in reality, great technical ability is only one of many ingredients in the recipe for farm business success.

The F Myth is a nod to “The E Myth” by Michael Gerber, top selling business books published in 1994 Voted #1 business book by Inc. 500 CEOs.  The premise of the E-Myth is: The Entrepreneurial Myth 1: the myth that most people who start small businesses are entrepreneurs 2: the fatal assumption that an individual who understands the technical work of a business can successfully run a business that does that technical work.

The F Myth #1 - To have a successful farm you need to focus on high levels of production.

Production is often used as a proxy for profitability.  The common thought being is that if I grow more it will make more money.
The reality is that production is part of a more detailed business equation.

  1. Yield (Y) x Price (P) = Sales Income (SI)
  2. SI – Input Cost (IC) = Gross Profit (GP)
  3. GP – Overheads (OH) – Interest (I), Tax (T), Depreciation (D)= Net Profit/Loss (NP/L)

Final Profit equation: (Y x P) – IC = GP - OH - I - D - T = NP/L

Each ORANGE part of this business equation is a leaver you can pull to change the end goal; PROFIT.

So the real measure of Farm Business success is PROFIT.

The best way to think of profit is to think of your business as you would a crop.  You create an ideal condition for it to grow and you monitor it, protect it, feed it to ensure it grows to maximise potential yield.  Profit is the business equivalent of yield. You use some to “feed yourself” and you use some to invest into the next year of your business. Without profit your business will need to draw off reserves and will have little to invest in for the future and will eventually die.

Production does have a big impact on Profit, but don’t neglect the other core levers in your business for the sake of it.

e.g. Over Capitalisation: It is common for farm businesses to over capitalise in the aim of chasing yield and quality. In many cases over capitalisation in depreciating assets may have very little impact on end yield but have a have a big impact on interest paid and depreciation (a very real and neglected cost).  So you may get a 1% yield increase but loose this extra revenue and more in the cost of depreciation and interest.  Ratio to work out:  What is your cost of depreciating capital per tonne harvested, litre of milk, kg of meat, or kg of wool?

Annual depreciation (think of this as the money you have to put aside each year to replace the machine in the future) (D)
+
Interest on money borrowed or loss of interest on cash not invested (I)
+
Annual repairs and maintenance (R)
+
Fuel (or other inputs) (F)

/ Divide by the total annual production volume (P)

D + I + R + F
—————-
P

Marketing Neglect:

Income = Yield x Price

They both have a very large impact on the amount of money received.  Do you give them the same amount of your time?
Do you spend as much time reading, researching, planning, doing and monitoring your pricing and marketing strategy as you do on your production research, trials, planning, monitoring and doing?  If not why not?

Gross Profit Neglect:

Gross Profit (sometimes referred to as Gross Margin percentage) is Sales Income less direct Input Cost (IC) e.g. seed, fertiliser, chemical, shearing, pest control, feed, etc…

How much does it cost (IC) you to grow that crop per Ha?
How much does it cost (IC) you to grow that steer or lamb per Hd?
What is your break-even point? Being aware of your break-even point will enable you to make the right decisions that to lead to higher gross profit.

e.g.

What sales income (Y x P) do you need to break-even?
Do extra inputs mean more yield but less GP?
Can you make more money growing less?

The difficulty of adjusting overheads to protect profit:

Overheads are very inflexible by nature. These are your standing still costs (you will incur them if you stand still and do nothing). Excessive overheads need to be kept in check but they are cost, if cut can affect the capacity of the business.

e.g.

You could reduce labour cost by doing more of this work yourself. This would lower your overheads but would have the negative effect of reducing the amount of work that could be done and possibly impact your physical and mental health.

You could cut professional advice and business services but this saving could cost you a lot more if you end up making poor business decisions as a result of it.

Key Points:

  • Look carefully at the key levers to Business Profit
  • Focus on the levers that have the biggest influence first
  • Protect your Margin not your Yield!
  • Yield is Vanity – Profit is Sanity!

Next week I will discuss F-Myth #2 - Farm Businesses have no control over the risks they face.

 

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