The punch-in-the-face plan

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By Dwain Duxson.

The punch-in-the-face plan - Apparently, it was Mike Tyson who said, "You will sleep better if you know your punch-in-the-face plan". So what I think he means there is that if you know your worst-case scenario, and if that's the worst thing that’s going to happen, then you are going to be ok, and you will sleep easy.

It was spelt out on the AgriCoach podcast, which featured Agrimaster Co-CEO David Edgerton-Warburton. Take a listen here. David said that, in his experience, not enough Farmers know their finances well enough to be able to work through a worst-case scenario situation. Then things happen in real-time, and it's like putting out the fire as opposed to preventing it.

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David also made another interesting comment that the lower the rainfall, the more likely the Farmers are better at managing their finances. He called it the how-long-can-you-last-without-going-broke scenario. In low rainfall areas, you have to manage your cash well by hoarding it away when times are good and then having enough stored cash to last two, three, or four seasons of drought if they occur.

In more reliable areas, you are less likely to budget for that many bad seasons, so his statement makes sense. I've said it before, I think the mathematically minded Farmers do the best. But you don't have to be mathematically minded to run a good set of books. That's more around discipline. Be honest with yourself; out of 10, if 10 is the best, how would you rate your financial management skills? Reply to dwaind@farmtender.com.au

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