6 Benchmarks for Farm Success


Has the ever-fluctuating agricultural market left you uncertain about the future? These six industry-established benchmarks can help you stay on track for long-term financial success.

  1. Working Capital
    • Do you have sufficient assets to cover short term debts? To calculate, subtract current liabilities from current assets. Ideally, you should have enough to cover at least 50% of expenses.
  2. Owner’s Equity
    • Who is the majority stakeholder of your business? Determine your Equity-to-Asset ratio by dividing net worth by total assets. Because this ratio calculates how much ownership you have in your farm, results of less than 50% means the bank may have more impact on business decisions than you do.
  3. Return On Assets (ROA or ROI)
    • Are you using your assets effectively? To calculate your ROA, divide your annual net earnings by the total assets. Optimal ROA should be 6% or more.
  4. Return On Equity (ROE)
    • How profitable is your operation? Calculate your return on net worth by dividing annual net income by shareholder’s equity. A return of 16% or more is ideal for long-term success.
  5. Expense-To-Revenue (E/R)
    • Is your operation using financial resources efficiently? To find out, divide your annual operating expenses by annual revenue. Efficient operations should achieve a ratio of less than 65%.
  6. Family Living Withdrawal
    • Farm families should strive to keep living expenses under 10 percent of total revenue. Farms that exceed this benchmark should re-evaluate how many individuals are making a living from the farm’s income.

Producers are encouraged to regularly recalculate, compare, and evaluate these six ratios when making cost management decisions.  



Kantrovich, Adam. “Financial Ratios.” Michigan State University Extension.
Kitchen, Sara. “6 financial targets for long-term dairy success.” Progressive Dairyman.


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