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maxflex540
Posted 7/2/2015 10:37 (#4657710 - in reply to #4657603)
Subject: Economies of scale


NW Iowa
Be careful to assume smaller (private) operations are more efficient and should be more successful. People in high-paying positions draw large salaries not simply because the company is huge. Upper management draws high salaries because they are smart, experienced, and can navigate through difficult situations. (they are also under a ton of pressure and work enormous hours). Small business managers such as myself, are often snowed under trying to be an expert in everything that affects our profitability that we undoubtedly leave potential profit/efficiency on the table. No one can be both an expert manager and a full-time expert laborer, but that is the typical farmer's business model.

Large companies can wait out downswings in profitability with stacked up working capital and seemingly endless equity in assets, while small operations' small lenders throw in the towel and sell them out.

A lot of farmers (maybe myself included) look at the large corporate model disdainfully and figure we could do it better and more efficiently than them. If we knew for certain what their cost of production was AND HOW THEY ACHIEVE IT, we just might have a different opinion.



Edited by maxflex540 7/2/2015 10:41
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