A good reputation is more valuable than money
Effective management of a farming operation today requires that records be kept so that managers can make informed decisions about the profitability of their farms. Even more significant these days is that most farmers require loans in one form or another to operate their businesses.
Most lending institutions require a detailed business plan and personal information on everything the farmer owns, as well as the status of any of their long term and unpaid loans. They will probably also require a history in the form of production track records as well as future scenarios including farm production, marketing and sales predictions. This can all seem very overwhelming to the beginner farmer but in fact A LITTLE know-how and A LOT of discipline is what is required and then it is just about taking one step at a time as one learns to negotiate and build relationships with the significant role-players in your farming environment!
Always remember that any reputation – be it a good one or a bad one – is created by continuously and consistently doing things in a certain way. Good things give you a good reputation; bad things give you a bad reputation and unfortunately it is very true what Benjamin Franklin once said, ‘It takes many good deeds to build a good reputation, and only one bad one to lose it!’ More recently Warren Buffet said, ‘It takes 20 years to build a reputation and five minutes to ruin it!’
When we go to any bank or other credit provider to try to obtain credit, they will look at your reputation in the form of your track record and history. If you have been farming for ten years, you must have some form of history which describes your ten years’ experience and presents a picture of your business. If you are starting out as a beginner farmer, you must be very aware that you are indeed starting out on a journey that means you are starting to build a reputation. John Rockefeller said: ‘Themost important thing for a young man is to establish a credit…a reputation…a character’.
Every business which we farmers interact with on this journey has the potential to help build (or break down) our reputation, depending on the way we conduct ourselves in doing business. Are we honest? Do we do what we say we are going to do? Do we pay when we say we are going to pay? If they help us, do we honour that trust and give them reason to want to help us again at another future time? Normally the first pre-requisite for borrowing money is having some form of security. The amount and type of security varies and depends on the amount of money to be borrowed. These days access to land can be sufficient but it is not always necessary to own land to qualify for a loan. More and more institutions are prepared to look at the credit history and reputation of the ‘business operator’ or farmer – this is just as important as the physical assets he owns. If one has a good credit history and is seen to be a low risk candidate, you have a much better chance of accessing credit than someone who owns land but has a reputation as someone who can’t plan, budget or work well with money – or who is not reliable about repaying debts.
When trying to access credit without any form of credit history, the first impression you create is very important. You need to impress upon the credit provider that you have planned well and know what you are talking about.
This means KNOW your business. Do a full SWOT ANALYSIS of all the strengths (S), weaknesses (W), opportunities (O) and threats (T) in your business environment. Don’t even think of going to ask for credit without a sound business proposal or plan. You must know what is in your business plan and understand it fully – understand how the figures work and what the potential is. Don’t make the all too common mistake of asking someone else to write your business plan up for you without being sure that what they say is accurate and feasible.
A business plan is not only for winning the confidence of a financier but is also a tool for yourself in defining a framework of your business and setting goals and benchmarks. A business plan is also never cast in stone – it evolves over time as you manage it and respond to the business environment.
Another important tool in your ‘tool box’ is a collection of useful references and testimonials. These are useful for any CV but too often people make the mistake of saving a testimonial from their school days and think that’s all that is required. Testimonials, references and certificates from short courses should be collected wherever you have the opportunity of working with someone or learning from them. A CV is a ‘living document’ – it too is not ‘cast in stone’ and should be changing every year, with every new work or learning experience. (Teach your children this too!)
As a businessman seeking credit facilities and loans, you need references from other people or companies where you have already conducted satisfactory business; a mentor who will give you a good character reference and a reference from another respected member of the community.
It is also important that you represent yourself as a professional. Be seen to be organised and efficient. Show that you have not only prepared well but are enthusiastic and believe in yourself. Remember you have to convince them that you are a good ‘bet’, i.e. someone who is likely to make a success of the business.
You must also plan to maintain a presence wherever you find success and are financed. Be a good communicator and keep yourself at the forefront of their minds – even when you are dealing with an institution, find individuals there with whom you can communicate well and build a warm relationship.
Do not suddenly fall silent if conditions turn out poorly and you have challenges and disappointments. Stay in communication throughout the bad times, seek expert advice, discuss contingency plans, keep updating them on developments, be they good or bad. If conditions are beyond your control, for example, the result of the droughts some farmers have experienced in recent times, they are often more understanding than you would expect because they too are keeping their finger on the pulse of the agriculture environment and outlook and will often be willing to help and accommodate the farmer. BUT…if you go quiet and seemingly disappear, they will automatically become suspicious and wonder what’s happening!
Reputation counts BUT ‘You can’t only build a reputation on what you are going to do!’ (Henry Ford). Just remember that at all times and in all your dealings you should be keeping detailed records and building healthy relationships. The track record and the potential are the two things which count most when you are applying for financing!
Article submitted by Jenny Mathews,Pula Imvula contributor.
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Publication: March 2016