Strategy and planning is an important part of farm business development.
Strategic planning can advance the business within the competitive market.
Having clear objectives (personal and business) and creating realistic/sustainable plans are particularly important at times of change.
We may have overall life objectives; business objectives; objectives around family.
We may have more specific objectives regarding a particular year, income, retirement etc.
For objectives to be achieved, we need a plan. So if the objective is to make a certain level of profit, the plan needs to detail how that will be achieved.
A few things can help when it comes to objective setting and planning:
- Write things down.
- Detail is important.
- Be realistic .
- Involve/discuss with others who may be affected by the plan.
- Be flexible and prepared to adapt plans.
Navigating Change: The Importance of Business Appraisal and Asset Valuation for Farmers
The farming sector is enduring a period of significant upheaval driven by economic and political change beyond its control. To help their businesses adapt and thrive, it’s crucial farmers take a step back and thoroughly understand their current business position. Conducting a comprehensive business appraisal is the most effective starting point for this process. This involves reviewing historic accounts, understanding profitability, and assessing cash flow. Having a clear picture of your farming business’s financial position allows you to make informed decisions about its future for the next generations.
Camilla Cummins
James Waddington and Camilla Cummins of Savills food and farming team offer some points for consideration to help farming businesses navigate the changing landscape and be as prepared as possible for the future.
Both James and Camilla are FCN volunteers.
James Waddington
Understanding Your Current Position
It’s crucial for farmers to take a step back and thoroughly understand their current business position. Conducting a comprehensive business appraisal is the most effective starting point for this process. This involves reviewing historic accounts, understanding profitability, and assessing cash flow. Having a clear picture of your farming business’s financial position allows you to make informed decisions about its future for the next generations.
Identifying and Valuing Assets
A key component of succession planning is knowing the value of your assets. Start by creating a detailed list of everything you own, including land, machinery, livestock, and any income-generating interests like telecoms masts or renewable energy installations. It’s also important to identify which assets are owned personally, by a partnership, or by a trading company. Understanding the value of these assets, possibly with the help of a professional valuer, will provide a clear picture of the total value, which is essential for future planning.
Planning for the Future
Succession planning is not just about the transfer of assets; it’s about ensuring the future success of the farm. Open and honest conversations with family members are essential. Discuss who will take over the business, when this will happen, and what the expectations are. Aligning views and setting clear goals will help in creating a smooth transition. Consider what you need to retain for your own retirement and what can be passed on to the next generation.
Classifying Assets for Strategic Decisions
Not all assets are created equal. Some are core to the business, while others might be nice to have but not essential. Classifying your assets helps in making strategic decisions about what to keep, what to sell, and what to transfer early. This classification also aids in identifying assets that might carry significant capital gains and do not qualify for any relief, which is crucial for tax planning.
Seeking Professional Advice
Navigating these changes and planning for the future can be complex. Investing in professional advice is invaluable. Whether it’s a lawyer, accountant, financial advisor, or agricultural consultant, a collaborative approach will help in finding practical solutions for succession planning and tax mitigation. Professional advisors can provide the expertise needed to ensure that all aspects of the business are considered and that any transition period with the next generation is as smooth as possible.
Moving Forward with Confidence
James Waddington, food and farming consultant, Savills says, “Start with the small conversations and building from there. This helps to break down what can feel like an overwhelming task into manageable actions”.
By understanding your current business circumstances, valuing your assets, and planning for the future, you will be better equipped to manage this period of significant upheaval as well as making sure your business is in the best possible shape.
Remember, you are not alone in this process there are professionals and resources available to support you every step of the way.
AHDB: Making A Business Plan – What To Consider
1. Consider how much money you need to make
AHDB offer lots of advice on business planning, and a very useful tool is their Profit Target Worksheet
2. What are the outputs you need to achieve the profit required?
Forecast outputs could be based on historical performance, or if you’re starting a new business, the data published by AHDB about yields, outputs and prices will help
3. Fixed Costs, Variable Costs and Machinery Costs
What are the costs involved in producing your crops or livestock? Fixed costs include labour, utilities and fuel. Variable costs include forage and fertiliser.
Making A Plan – Putting It All Together
A business plan is a written document that describes your business. It covers objectives, strategies, sales, marketing and financial forecasts.
You’ll need a business plan if you want to secure or maintain investment or a loan from a bank
Find out how to write a plan, with free templates and examples: Click here
More useful resources….
The John Nix Pocketbook
- This pocketbook aids in farm and business management for UK-based agricultural business and all those working within the industry: The John Nix Pocketbook
Agro Business Consultants
- The Agricultural Budgeting and Costing Book: Click here to find out more
Business Goals and Strategic Planning
- AHDB have an online page referring to Farm business planning, click here to view.
Downloads:
- The following downloadable document guides you through developing a strategic business plan for your farm business: