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Internal Scanning

Internal scanning involves looking inside the farm business and identifying strengths and weaknesses and assessing the businesses’ resources and management’s skills. It is part of the strategic planning process. An overview of Strategic Planning for a Farm Business and how internal scanning fits into the planning process is available. Internal business scanning is comprised of the following three categories: 1. Farm Business – What are the unique strengths and limitations of your business? 2. Individual Person – What are the unique skills and limitations of each person involved in the management of the business? . Individual Enterprises – How will each enterprise compete in the marketplace? What are the critical factors that determine the success or failure of each enterprise? Making a Business Inventory The first step in internal scanning involves describing your business. This will help you assess the value of the various aspects of your business. Below are four broad categories that can be used to describe your business. •Physical Resources – The farm business consists of physical resources. These can easily be identified by most farmers and include land, machinery, facilities and other assets. Human Resources – The farm business also consists of human resources. These are more difficult to identify. Granted, we can easily name the people involved in the business, but describing what function each person provides for the farm business is more difficult. These include topics such as identifying the management skills of the participants and describing the decision making structure. •Other Resources – Other farm business resources such as financial resources also need to be identified. For example, the business records will readily identify these from the business financial statements.

To identify financial resources you may want to ask yourself if there is adequate working capital. Is there borrowing capacity if needed? Are there outside equity sources? •Other Factors – A variety of other factors including reflecting on historical success, describing business culture, reviewing the information collection system and identifying any other relevant factors. Scanning the Farm Business Assess each of the following aspect of your business. 1. Current and Past Financial Performance – How has the business performed financially in the past? Has it met the expectations of the operator and the family?

Performance can be assessed with the following factors: oNet farm income. oReturn to management. oEarned net worth growth. oReturn on investment (equity). oOff-farm income. oOther. 2. Adequate Income – Closely associated with business performance is the ability of the business to provide adequate income for the farm family. This involves current needs and also expected future needs. What is the ability of the business to provide the following: oMaintain or expand family living and lifestyle. oProvide for family living needs plus reinvestment for growth of the business. Provide for future family needs such as college expenses, etc. oProvide retirement income for the operator. oProvide income for more than one family if a succession strategy is involved. oOther. 3. Financial Status – Also related to business performance is the current financial status of the business in terms of liquidity (cash-flow, working capital) and solvency (level of equity). oLiquidity — current ratio, working capital, credit reserves. oSolvency — net worth (earned and market value), debt to asset ratio, risk-bearing ability. oOther. 4.

Information System – What is your ability to track what is happening economically, financially and physically in your business? oTrack income and expenses. oDetermine farm income and cash flow. oProject financial performance. oMonitor enterprise costs and returns. oMonitor efficiency factors. oOther. 5. Unique Resources – Does the farm business and its management team possess any unique resources or skills that can be used to create a competitive advantage? oSpecialized knowledge or skills. oSpecial business relationships. oFarm location. oOther. 6.

Culture – What aspects of the family’s or management’s culture affect the farm business? Culture refers to beliefs and values of the farm family that affect decision making. Examples include your attitudes about the factors below. oExpanding the business. oAdopting new technology. oBorrowing money. oResponding to change. oShouldering responsibility. oCommunicating with family and management associates. oUsing authority. oOther. 7. Current and Past Decision Making Performance – What is your track record for making successful strategic decisions in the past? These include the major decisions that affected the success of the business. Who was involved? oWhat information was used? oWhat methods were used to reach the decisions? oHow successful were the decisions? oDoes anything need to be changed in this process? oOther. Scanning the Individuals Personal scanning involves assessing a broad range of various types of management skills. Your managerial skills and those of your business associates are essential for the long-term success of your farm business. Managerial skills have much to do with the types of strategic alternatives pursued by your business and the overall success of the strategic management process.

Since the role of the farm manager has changed so dramatically over recent decades, you will most likely identify some new skills that you and your management team must develop. With your family and/or management team, work through the assessment of the management skill areas listed below. You may involve a business associate in assessing your management skills. Look for exceptional skills and competencies. These are some of the building blocks for developing your strategies. You may also find that some skills need to be improved.

Or you may find that you need to bring in people outside the business who can provide special talents. 1. Strategic Management Skills. How would you rate your strategic management skills? Strategic management involves developing long-term strategies for business success. Examples include: oVisualize the future and where I fit. oIdentify success factors. oIdentify personal and business strengths. oIdentify industry opportunities. oOther. 2. Entrepreneurial Skills. How would you rate your entrepreneurial management skills? Entrepreneurial skills involve seeking and trying new ways of developing successful business ventures.

Examples include: oInnovation. oAssess risk/reward of a new venture. oSearch for opportunities. oSeek new information. 3. Financial and Risk Management Skills. How would you rate your financial and risk management skills? Financial and risk management involves seeking and exploring appropriate methods of financing business operations and capital investments in combination with risk control techniques. oPrepare financial information. oInterpret financial performance. oAssess risk exposure. oDevelop risk management strategies using insurance and income protection instruments. 4.

Information Management Skills. How would you rate your record keeping skills? Information management involves creating and utilizing a business information system that provides data for decision making. Examples include: oAccounting and record keeping skills. oBudgeting skills. oBusiness analysis skills. oComputer skills. oDesigning a record-keeping system for the needs of the business. oAssembling information for decision making. 5. Personnel Management Skills. How would you rate your personnel management skills? Personnel management involves your ability to manage employees.

Examples include: oHiring. oTraining. oSupervising. oEvaluating. oDismissing. oMotivating. oOther. 6. Team Skills. How would you rate your ability to work as a part of a team? Team skills involve the ability to work together with others to accomplish agreed-upon objectives. oUnderstanding the role and objectives of the team. oSubordinating your personal agenda to the agenda of the team. oDo your share of the work. oIdentifying team weaknesses and fill those needs. oAllowing recognition for team accomplishments to be received by all team members. 7. Inter-personal Skills.

How would you rate your inter-personal management skills? Inter-personal management involves your ability to work with others to achieve an agreed-upon objective. Examples include: oRecognize others’ individuality. oCommunicate effectively. oMediate differences. oListen to others. oOther. 8. Organization and Planning Skills. How would you rate your organization and planning skills? These skills involve organizing resources and information, and developing action plans of how to accomplish project objectives. Examples include: oIdentify project objectives. oOrganize information. Pay attention to details. oDevelop action plans. oImplement and evaluate plans. oOther. 9. Operations Management Skills. How would you rate your operations management skills? These skills focus on your ability to manage the production, processing and/or marketing process for each of your enterprises. Examples include: oEfficiency. oConsistency. oDesired output. oFacility utilization. oIntensive production. oTechnical production skills. oProduction flow. These skills include specialized skills such as agronomic skills, marketing skills, mechanical skills, and many others.