As consumers and non-farm businesses tighten their belts, a Purdue Ag Economist is suggesting the same approach for farmers. Brent Gloy agrees that when pursuing business opportunities, debt can be a valuable tool, but he says you may also want to think carefully about how much money you want to borrow.
"Opportunities may come up, and you may need to borrow money to go after them," he said. "Borrowing in moderation and using the funds for the right things is very important." He points to investments that allow you to expand, save on costs or boost efficiency.
While thinking about potential returns and evaluating approaches can be important, he adds that you "don't want to walk away from things that fit with what yu do and that you're capable of halding."
The key is to understand the cost versus return for every business decision you make, Gloy says. He offers these management tips:
- Understand the economics of your business. If you have an advantage, always work to increase it.
- Do not be paralyzed by analysis and complication. Do not blindly make be decisions based on faith.
- If you find yourself in financial trouble, address it early and honestly.
- Clearly understand risk and return trade-offs. Don't gamble your financial security for things you don't need.
- Invest in yourself. Your knowledge and talent is the most valuable set of assets that you own. Make good choices here and you will reap benefits for years to come.
- Invest in those around you. There are many talented people in this world. You will clearly be better off if they are working toward helping you solve problems. When you invest in someone else it usually pays dividends down the road.