As production agriculture has become more complex so has the business of agriculture. For this reason more farmers are turning for help to a small group of experts known as agricultural management consultants.
When being a farmer meant just growing crops and running livestock to make a living, management consultants were not needed. In those days, it did not take the vast amount of paperwork and office overhead to achieve a profit margin as it does today. Times have changed.
Nowadays for instance, the process of getting financing is much more complex. The farmer needs to provide the lender with a greater amount of information that gives confidence the loan will be repaid - on time. Lenders want historic performance, a current financial picture and budget information and they want it well organized and in as much detail as possible. Once the loan is made, the farmer needs to continually provide the lender updates on how things are going as it relates to the budget.
Not too many years ago, when a farmer's profit became thin, a familiar face at the local bank might just look to next year to make it up. Times have changed there, too.
Agricultural management consultants can be an asset because they have the ability to pull together information and present it in a form the banker likes. Often it's that lender who encourages the farmer to hire an ag consultant in the first place. Lenders these days are particularly sensitive to loans in trouble. When they spot a problem, they're quick to "recommend" that the farmer get help.
Just knowing that a consultant has been brought into the farm office gives most lenders some comfort. Sizing up the relationship between the lender and the farmer, which may have become somewhat strained because of a problem loan, a consultant can become something of a peacemaker, smoothing the feathers on both sides. Maybe there is a problem relating to the farm's organization, or the balance sheet may need restructuring, or the management structure may need to be upgraded to include new positions.
Because most farmers are good at farming and many of them prefer to be out on the farm rather than be enmeshed in office paper work and administrative problems, an agricultural management consultant can fill a useful void. The consultant can straighten the kinks in farm office management, performing the functions of an interim controller or chief financial officer, prepare government and financial reports, and recruit key people for the office staff; then, the consultant usually fades out of the picture, perhaps returning only periodically to monitor the situation.
On occasion, however, a client will hire a management consultant on a permanent basis to handle all of the business functions, especially if the owner lives away from the farm. Generally though, a management consultant is hired for a specific assignment that may last a few months, perhaps up to a year. In those cases, the consultant is more like a firefighter, hired to put out hot spots.
Who hires agricultural management consultants? Usually, mid-to large-size farming operations. The general pay range is $100 to $180 an hour and the specific assignment is spelled out in a written contract.
Danny Newton of Stratford, who grows cotton, wheat, safflower and alfalfa, hired the Charles Hoyt Co. of Fresno to intervene when his lender was bought by another bank and he had to meet with a succession of different loan officers.
Newton said: "Chuck Hoyt was able to put together for us a package in the language a bank understands. He's got that kind of a background. Bankers these days look only at numbers, trends and ratios and have no way to put any background information to those things. He was able to talk to bankers in their language with our numbers. He was almost an interpreter."
When Howard Elmore's bank suggested he get a "numbers cruncher" for Sahara Packing of Brawley, the Hoyt Co. was among those suggested. Sahara Packing grows 18 different produce items. Hoyt prepared a budget that the bank liked, talked to lending institutions and "found long-term money." "That's where he helped us out tremendously," Elmore said, "he made better utilization of our accounting system."
Despite the several hundred miles between Fresno and Brawley, Elmore said Hoyt worked a couple of days every other week for about a year. "He has one of those businesses where he works his way out of a job."
Although a consultant reports directly to the farm owner, he or she works closely with the farm office staff, learning from them and at the same time recommending and guiding. A new but experienced eye often may spot weaknesses in an organizational structure that otherwise would go unperceived because a task or a process has "always been done that way."
The consultant may spot unnecessary positions in an office or spot those people with the talent and ability that warrant promotion to new positions. For example, a farmer may agree that the organization needs a controller but may not recognize that someone already on the staff would be a good choice for the position.
A consultant can relieve a farmer of most of the work involved in filling a high level office position by writing the job advertisement, knowing where to place it, then screening and interviewing applicants before making a recommendation to the farmer. It's not unusual these days to receive dozens of replies for a good farm office position.
Sometimes the farm may require the services of a certified public accountant or an attorney. An agricultural management consultant will know which attorneys specialize in real estate, water, labor, general business or bankruptcies, and which CPAs have specialties in audits, tax or financial reporting.
The jobs given a consultant vary widely. Sometimes it's helping to guide a farm through the paperwork and the ever-changing regulations that govern programs administered through the federal Agricultural Stabilization and Conservation Service. It may be creating a farm's report system for each chemical used in crop production, now a state requirement.
An agricultural management consultant can bring to the job "hands on" experience acquired in the "trenches" of day-to-day farming operations. This can be invaluable in today's agricultural business environment.
Consultants must be skilled in accounting organization, bank negotiations, financial and operational "work outs", working capital restructuring, interim general management, asset sales and purchases, personnel acquisition and training, feasibility studies and crisis control.
Article researched and written by Richard Hall for Charles Hoyt Company-1994