A recent webcast participant posed a common question from producers and lenders: What will be the biggest change in agriculture between 2026 and 2030? The expected response usually centers on technology such as AI applications, regenerative agriculture, or consumer, societal, and global trends that are altering the paradigms of agriculture. However, I countered with an answer that many would not consider: the biggest change may be the management mindset surrounding cash flow management and profitability.

Analyze any farm records database, and you will find a clear fork in the road between the top 20 percent and the bottom 20 percent of producers. Historically, FINBIN data shows this difference is especially apparent in businesses generating more than $500,000 in annual revenue.

As agricultural producers transition assets and management responsibilities to the next generation, there will be greater reliance on renting and leasing assets rather than owning them outright. Producers who possess a management mindset focused on planning, executing, and monitoring, will be the difference-makers, regardless of the size of the operation or the stage of the economic cycle. At the core of that mindset is a simple but powerful framework: the REM framework (Respond, Execute, and Monitor).

What are ten practices that, from my experience as an educator, speaker, and business owner, have stood the test of time?

Ownership of the Numbers

Preparing financial statements such as the balance sheet, cash flow statement, and income statement goes far beyond obtaining a loan from the bank or satisfying an accountant or attorney involved in estate planning. Strong ownership and management require someone within the business to know, at any given time, the financial status of the operation and to communicate that information effectively.

As a veteran of the farm crisis of the 1980s, I observed that this practice proved invaluable during difficult times and became even more beneficial when the economic tide eventually turned.

Cash Flow

The foundation of any business plan is a cash flow projection supported by an operational plan. Key assumptions are made regarding prices, costs, debt service, family living withdrawals, and production, and these assumptions are refined as historical data is analyzed. A trend observed nationwide is that cash flow planning is being drilled down to a monthly or quarterly basis, regardless of the enterprise, size, or complexity of the business.

Guardrails

Expect abrupt changes in markets and input costs due to trade sanctions, weather events, and military actions. Financial guardrails must be established through financial sensitivity testing and scenario analysis.

Recently, a seasoned producer enlisted his daughter, an FFA student, to gain practical experience by testing assumptions using spreadsheets. This created a win-win situation for both generations. For her, it provided hands-on business training and an avenue toward eventually managing and owning the operation. For him, it brought a fresh perspective and a future successor already grounded in the numbers.

Cost of Production and Breakeven

Any elite business focused on profitability and cash flow knows its ballpark cost of production. In this case, “ballpark” means within a 5 percent tolerance, with the goal of narrowing that range to 1 percent to 3 percent as more trend data is collected and analyzed.

Breakeven levels can then be established and used to make pricing and input decisions on an objective rather than emotional basis. These benchmarks also serve as important guardrails in financial sensitivity and scenario analysis.

Do not let perfection get in the way of getting started. Remember the principle of moving from simplicity to complexity as your financial management system evolves.

Enterprise Budgets

Multiple revenue streams require enterprise budgets and analysis. This allows managers to focus their capital, resources, and energy on the enterprises that generate the greatest returns and profitability.

Some enterprises compete for resources, while others are complementary and build upon one another. Therefore, both the short-term and long-term implications of enterprise decisions must be carefully evaluated.

Marketing Plan

A major trend among elite managers is the development and execution of a marketing plan. If marketing is not your area of expertise, advisory services that utilize farm- and ranch-level financial information, as previously discussed, can help you make informed and profitable decisions.

Pride and ego are often the two biggest obstacles to overcome in a world of economic volatility. At certain points in the economic cycle, the goal should be to achieve consistent base hits rather than swing for home runs. The human emotion caused by leaving money on the table, especially when markets move higher after a sale, is difficult to experience, but successful managers learn to focus on disciplined execution rather than perfect timing.

Risk Management

One factor that has helped prevent a full-scale financial crisis like that of the 1980s is the widespread use of crop and livestock risk management programs. The ability to assume and manage risk is often related to the degree of financial leverage, the level of working capital, and the capacity of the individual and key stakeholders to absorb potential losses.

In this area, do not overlook life and disability insurance for key individuals, as well as liability insurance and coverage for livestock, machinery, and structures. Together, these protections form a critical component of a comprehensive risk management strategy.

Family Living Expenses

What do strong managers do that less-than-stellar managers often neglect? One common issue among struggling businesses is the co-mingling of business and personal expenses. Some research indicates that as much as 28 percent of expenses may be co-mingled, often for tax reasons or as a fringe benefit of being a small business owner.

Elite managers separate business and personal expenses and explicitly include family living costs when calculating breakeven levels and cost of production. Childcare, adult care, healthcare, and insurance expenses are often what I call “budget busters.” These costs can create significant financial strain and may lead to either one-time or recurring borrowing needs, particularly when financed through term debt.

Profit Plan

Beef industry, beware! Critical mistakes are often made at the top of an extended economic cycle. Two phrases that should raise red flags during prosperous times: “It’s different this time” and “This is a new normal.”

Elite managers remain disciplined. They focus on building efficiency before pursuing growth, paying income taxes, and strengthening working capital before fully enjoying the fruits of prosperous economic times. They recognize that today’s profits must be used to prepare for tomorrow’s challenges, not just capitalize on today’s opportunities.

Deliberate Education

A comment often heard at sponsored events is, “I wish so-and-so were here so they could hear this message.” Frequently, that individual is focused on what is urgent rather than what is important, or believes they have heard it all before.

Successful adults who are committed to personal growth and improving their business culture typically invest two to six hours per week in deliberate learning to regenerate the mind, body, and spirit of both themselves and their operation.

The fork in the road always presents alternatives. Following the practices outlined in this article can help place you on the high road toward profitability, fulfillment, and the achievement of both your business and personal aspirations.