Financial pathways for creating regenerative outcomes
Listen via audio below, or scroll down to continue reading the blog.
By Kim Deans
Financial concerns are one of the most common challenges I hear from farmers interested in implementing regenerative practices. The transition towards more regenerative lives, businesses and landscapes always involves a financial aspect and we often confront financial uncertainly along the way. My personal journey working alongside hundreds of farming businesses navigating processes of change has taught me these key steps for effectively navigating the financial aspects of transition and change.
Get a handle on your cash flow
Before you start changing things in your business it’s essential you first get confident managing your business’s cash flow. Cash flow is how our business survives and without a solid foundation of understanding your cash flow you are inadvertently making your regenerative transition riskier.
Becoming confident creating and using a budget to evaluate risks, meet debt repayment schedules, evaluate decisions and monitor our progress is the foundation for making informed decisions and the key to our business success. It is essential that we don’t outsource this role without first building these skills in ourselves as business owners. Until we build our financial literacy it is not possible to confidently delegate financial roles within the business whilst keeping a handle on our financial position. Without developing our personal financial skills, instead of delegation we tend towards abdicating responsibility for financial management to others or avoiding it completely, then being surprised when we find out all is not what it seems (which I have seen happen all too often).
We get better at budgeting the more that we do it, while income in agricultural systems can be variable, costs are easier to account for and once we know these, we can quickly respond to changing economic circumstances with more clarity.
Understand your business profitability
Our business survives with cash flow and thrives with profit. In agriculture we have a habit of measuring our success based on production outcomes such as achieving the top price at the cattle sale or the highest yielding, weed free crop rather than considering whether we have made a profit or not. Many land manager’s fears around regenerative agricultural practices are linked to this mindset and to concerns that they may lose production, even though maximising production does not necessarily mean maximising profit. It is vital that we focus on profit rather than maximizing production at all costs if we are to have a resilient business that achieves regenerative outcomes.
Scenario testing
Once we have established a solid foundation of farm financial management, we can then use our cash flow budgets, cost of production data and profit and loss statements as a basis for testing regenerative transition scenarios. This helps us to see how our regenerative transition could impact our business viability so we can plan how much land to start transitioning and where to focus first. This process helps us to get a feel for how the financial aspects of the transition can play out and understand how much risk our business can cope with. This is valuable information to share with business partners and in bank reviews. The best part of scenario testing is we don’t have to spend any money to get a feel for how to best approach our next steps.
Think long term
Regenerative transitions require a long-term commitment. An ongoing, evolving practice of understanding your current and forecast financial position empowers you to make timely, confident decisions and adapt accordingly as seasonal, market and policy conditions change.
Consider your attitude to risk
Working on our financial skills helps us make informed decisions about our regenerative transition and consider the financial risks involved in the transition process. Regardless of our attitude to risk, whether we are a risk taker or a risk avoider, our attitude to risk can be both a help and a hindrance in approaching a regenerative transition. Financial skills will keep risk takers on track and grounded into the reality of the financial position, while providing those who avoid risks with necessary information to make well considered decisions and be able to sleep at night.
Prioritise for effectiveness
Our financial skills build a foundation that helps us to prioritise taking actions that bring the highest impact for the least cost. Our budgeting skills support us to strategically approach the process, breaking down the bigger projects and allocating costs over time so we can plan how to use and build our financial resources for success.
Be aware of your mindset
When we decide to make a change in our life, business or landscape, the process of change puts us out of our comfort zone and brings us up against our self-limiting beliefs. A fixed mindset can have us avoiding developing our financial skills, believing that our financial skills will not change with time, practice and effort. Saying things like budgets never work, or that won’t work at my place is a key indicator of a fixed mindset. When we have a growth mindset, we understand that we can develop our financial skills and that we will get better at budgeting the more that we do it. Being open to learning new skills and staying curious about how things could work for us is a sign of a growth mindset.
Many of us have inherited a scarcity mindset from the families or cultures we are born into. Farming families have a long history of making ends meet, stretching every dollar because “money doesn’t grow on trees” and doing everything to avoid paying tax. A scarcity mindset, characterised by feelings of lack can have us thinking and believing we don’t have enough, we don’t know enough, we don’t do enough. When we start to see our scarcity mindset in action, we can consciously work on flipping the script towards a more abundant point of view.
Settle your nervous system
Becoming aware of our mindset is powerful, yet sometimes we can still experience resistance that is difficult to overcome, even when we have a good understanding of the limiting beliefs that are impacting us. This happens because we can’t consciously outthink our sub conscious programming that can be sabotaging our efforts to change. It can be difficult to create a new future when we are stuck in patterns of thinking and behaving that are based on unconscious core beliefs and have us stuck in a flight/flight/freeze response. Learning about and finding how to regulate our emotional state supports us to create our future from a calm and settled state. One method that has been life changing for us is TRTP. Learn more about TRTP here.
“In any given moment we have two options: to step forward into growth or step back into safety” – Abraham Maslow
Resources
Download my 12-month cash flow budget excel template here
Some tips for overcoming a scarcity mindset
Break through what’s holding you back with The Richards Trauma Process
Further Listening: