Basic business profitability is essential to the long term survival of any business.

In the strictest sense, profit is return after meeting ALL cash and non-cash (like depreciation) costs of production. Profits retained in an operation contribute to increased owner equity over time.

Business operations will eventually cease if accrual-basis owner equity is trending downward over time.

The most effective method for managing this area of risk is through effective and up-to-date financial records and adequate financial planning.

If you know where you stand financially, you can manage appropriately. Without this basic understanding, too often poor management decisions can ultimately lead to the loss of the family farm.