Farmers: test your farm’s financial fitness
We sat down with Elliot Taylor to discuss farm business income, farmers’ uncertainty surrounding post Brexit and the importance of reviewing your business performance.
Across the agricultural industry, there’s a high degree of uncertainty as farmers and rural businesses wonder what a post Brexit farming sector in the UK will look like. International trade and domestic policy seem to be quite high on the agenda in terms of how this will work when we leave the European Union.
This uncertainty in farming, however, isn’t particularly new – whether it’s fluctuating prices, frustrating weather conditions, or the decisions our politicians make on the industry’s behalf, farmers have always had to adapt and manage turbulent and uncertain times. Given the degree of change in the sector, farmers really must ensure their business is resilient enough to weather any storm. The best way to do this is to test just how flexible their business is to bounce back in the midst of unstable times.
Review your performance
Farmers must ask themselves: where have we been? Where are we now? and where are we going? It’s so important for you, as a farmer, to review your business performance, evaluate what you do, look at how efficient you really are and review your financial position.
Farmers often forget to think of personal objectives as well as business ones; sometimes the personal or family objectives are the most important ones and if carefully considered they can help a farm meet its business objectives. My advice is that farmers must test their farm’s financial fitness; carry out a business health check on an annual basis to identify the business’s strengths and weaknesses and to enable change.
The word benchmarking is used a lot these days but being able to distinguish, learn from and adapt better practices from other farmers to help improve farm performance is central to farmers being successful. It’s vital that farmers fully understand how their businesses are performing compared with farms of a similar nature in a similar geographic area. This will help identify areas for improvement and establish best practice standards.
Of course, it’s encouraging to see that farm business income last year increased across the majority of farm types however it’s important to remember the key driver was the change in exchange rate which led to an increase in the value of the Basic Payment Scheme (BPS) and firmer prices. When we consider the average income per farm in the North East, for example, was around £70 per acre and £69 of that is coming from BPS it’s clear that farmers must look at their businesses now for ways to improve their enterprise performance and overall profitability.
Without carrying out regular business analysis and considering short, medium and long-term objectives, farmers could face difficulties in an ever-changing industry. Planning is essential to any business, large or small, so that it can sustain challenging times.
George F. White works with farmers across the North, to ensure their businesses are in the best shape they can be, to adjust to unexpected times, and become more competitive, more productive and more resilient to risk. By working closely together, we help farmers reach their business, and personal, objectives to develop their own farms into world leading enterprises.
If you’d like help to shape your business strategy, and set objectives for business growth and resilience, please get in touch: firstname.lastname@example.org or 07590 445301.