There has been a noticeable shift in sentiment amongst our farming clients in the last 12 months with more looking towards the future and how to protect their businesses through the Brexit process and beyond. We thought it would be useful to share our thoughts on how farming businesses can best prepare and safeguard for the future.
1. CONSIDER ALTERNATIVE INCOME STREAMS
Look at options for conversions of buildings, amenity uses of land or value-added processes to broaden the sources of income and be less reliant on one market. Many farmers have taken this approach already but it is always worth re-looking at income sources and ensuring an opportunity is not being missed. For example, letting buildings which are no longer useful to the farming enterprise could provide an income which would allow investment in new buildings. For further ideas please see Richard’s article here.
Consider whether you have any land which may be strategically placed for residential development. With recent announcements on changes to house land supply calculations there could be a further window of opportunity for those with strategic land to secure development.
2. BUDGET & STRESS TEST
Having accurate working budgets which are reviewed regularly provides an essential resource when considering cropping, machinery and manpower. Preparing a budget at the beginning of the year and then forgetting about it doesn’t provide a useful tool for planning future years so they must be reviewed frequently. We would also advise stress testing budgets at different yields, input costs and receipts so the worst case scenario has been considered.
3. FINANCIAL CONSIDERATIONS
Before purchasing new equipment, additional land or investing in improvements, consideration should be given as to how these are to be funded. Furthermore, thought should be given to how this may impact on future funding. We have seen instances where someone has taken advantage of a good hire-purchase offer only to find that the repayments mean a bank will not approve them for secured lending.
We cannot discuss finances without mentioning tax. This is a factor which needs to be considered when looking at diversification activities, especially as income from these cannot necessarily be considered farming income.
4. EVALUATE RISKS
Each farming business should consider the threats it faces and plan accordingly. If the risks are known, consideration can be given to them before a situation arises. Key risks we consider when looking at farming businesses are:
5. SUCCESSION PLANNING
Considering the future plans for the business at the earliest opportunity means decisions can be made with the eventual aim in mind. Whether it is passing the farm to future generations or sale on retirement, the operation of the business leading up to that point may differ. Whilst it can be a difficult matter to discuss between family or members of a farming partnership, having a robust succession plan enables all parties to work to the same end goal.
Whilst paperwork is everyone’s least favourite activity, it is not something which can be ignored in modern farming. Spend some time each year ensuring all the documents are in place and easily accessible should you have an inspection. Penalties received can be large and can be avoided by having the right documents to hand when an inspector knocks on the door.
Whilst the current uncertainty in the land market, commodity prices and political outlook is concerning for farm businesses, it is outside most people’s control. However, with forward planning, strategic thinking and due diligence, it is possible to make businesses as resilient as they can be for the years ahead.
Please call me for more information or to find out how our Rural Property & Business team can help you and your business.Back to articles