In 1981, George T. Doran published a paper in Management Review that introduced SMART goals as a tool to improve the chances of reaching management goals. Clearly identifying what you want to achieve during a specific budgeting period will better enable you to achieve it. You can use the SMART tool for both short-term and-long term goals; the point is to make your goals clear and well defined. Writing down clear goals makes them seem more tangible and provides a reference for decision making and monitoring success.
Here are some examples of budgeting goals you might consider for your farm:
- Be more financially secure
- Reduce debt load
- Rent more land
SMART is an acronym for specific, measurable, attainable, realistic, and timely. When you write down a goal, you’ll want to make sure that it meets all of these criteria.
To illustrate, we’ll apply the SMART goals process to the goal of reducing debt load.
When defining a goal for your farm, be specific about what you want to accomplish. Think about the common “W” questions:
Who in your farming operation will be responsible for this goal? You may want to meet as a family or with key managers to open up the discussion and then decide on the person responsible.
By what amount do you want to reduce debt? Perhaps you want to target a specific loan to pay off.
Why are you setting this goal? For example, perhaps you have been focused on growth for several years and now it is time to shift resources to debt reduction, or maybe you want to reduce debt reduction to increase working capital.
How are you going to assess whether you’re meeting the goal? It may take several months or even years to complete, so set milestones to ensure that you stay on track. For example,
- Pay off operating loan #1 in 6 months.
- Forego purchasing new assets this year so all extra funds can be diverted to debt reduction.
Share monthly measures with your family or team to ensure your budget is in line with your actual financials.
What do you need to do to make this goal attainable? Will it require a change of attitude? The purpose of articulating the goal is to motivate, so make sure it’s firmly grounded in reality. Use historical financial data as a benchmark to determine whether your goal is achievable within your budget.
Achievable goals are based on the current conditions and realities of the ag climate. You may desire to reduce debt, but if a recession is forthcoming or outside international forces have negatively impacted the grain market, then your goals aren’t relevant to the realities of the market.
Anyone can set goals, but if they lack time frames, the chances of success are slim. Decide on a timeline for achieving your goal, and set up time every month to monitor your position to make sure you are moving towards it.
When writing your SMART goals for your farm, be prepared to ask yourself and other team members a lot of questions. The answers will help you fine tune your approach. Analyze your successes and failures. By studying why a goal was or was not met, you can improve your chances for success next time. Goals change over time, so periodically review them to see if they’re still appropriate, and adapt them as circumstances change.
At AgriSolutions, we provide agricultural consulting services to improve business performance on medium to large sized family farms. We can help you set financial goals, create an action plan for achieving them, and evaluate your progress along the way. Check out our case studies to learn how we’ve helped other farmers like you, or click the link below to request a free consultation.