Tag Archive: cash

TOP PERFORMING FARMS: STRIVING FOR SUCCESS

Elliot Taylor looks into the characteristics of top performing farms in the UK, giving advice on how you can improve your business performance and future proof your business.

If I were to ask you what are the characteristics of top performing farms; what would you say? Would it be high yields, the best soils or perhaps the size of the farm, or is it down to selling price, the type of machinery or system?  These factors are without doubt, important, but the management practices you adopt are the key to becoming a top performer. How can two identical farms, with the same size, soil type and systems be so different in terms of profitability?

Top Performing Farms

Characteristics of top performing farms is the first topic on the agenda for our seminar series across the North. Why? Because Brexit is likely to cause the biggest shake up within the agricultural industry for a generation and everyone wants to know how best to weather any potential storm ahead.

Interestingly, The Agriculture and Horticulture Development Board (AHDB) released a report looking at the key characteristics of the top performing 25% of farms in the UK. The report identified several areas that can improve performance; things in your control, and if adopted will make you more likely to be a top performer and help you to future proof your business going forward. My brief thoughts on some of these areas are below.

Cost Control

Focus on minimising overheads, in particular power, machinery and labour. For example, with machinery ask yourself, can I keep machinery for longer? Is my machinery well maintained? Can I share machinery with a neighbouring farm? Also look at how you buy you machinery, should you consider restructuring existing finance.

Aim and Objectives

How often do you really talk about moving your business forward? Make time, sit down and talk about your aims and objectives, but don’t just focus on the business, discuss your personal wish list too.

Prepare Budgets

You’re more likely to be a top performer if you prepare budgets. Budgeting will help you forward plan and understand what effect a price change or a fall in subsidies will have. Budgets will help you understand your future profitability and, most importantly, the cash you have available during the year.

Compare your Business

Whether it be an internal comparison with your own business year on year, or, using external data, the more information you have at your fingertips the more successful you’ll be. Top performing farms benchmark, attend discussion groups and look closely at key performance indicators. My advice is to do the same.

Know your Market

Speak to your buyers, ask them what they want and determine if you can deliver it? Work out the cost to your business if you don’t meet the grade and work out the advantage if you do.

Attention to Detail

It’s impossible to focus on every little thing but try and focus on the things that are important. Making a number of small changes can have a major impact on the bottom line. Identify say ten things that you can change and work through them one by one. Consider the positive cumulative effect these change will have on your business.

Be Prepared to Change

If you identify a problem or see an opportunity be prepared to change. Don’t just prepare budgets or analyse your business, make the changes too.

Innovate

It’s no secret that focusing on technology and productivity will drive you forward. It’s likely that the push to improve farm productivity will continue supported by grant funding, so make use of them. If you innovate you will make your business more sustainable, resilient and productive.

Staff

It goes without saying, look after your team. Explain your aims and objectives; get your staff to buy into what you want to do and train them well. Not all farms have employees but remember to look after family labour as well.

Specialise

The farms that specialise are more likely to be in the top 25%. Focus on what you’re good at and what suits your farm.  You may be more profitable if you have one system but do you want all your eggs in one basket?

As I mentioned, all these are things are practises you can do something about and those looking to be one step ahead of Brexit must consider the depth they know their business, how it will react to change, and finally, be prepared to make the changes necessary to remain profitable.

For further advice, please get in touch with our local team of dedicated Farm Business Consultants.

Northumberland and Borders: Andrew Jamieson
County Durham: Elliot Taylor
Yorkshire: Simon Britton

The importance of cash flow for business resilience

Louis Fell, Partner at George F. White, discusses the importance of cash flow for business resilience.

“Across Yorkshire, we have such a diverse range of rural businesses, many of which have developed on the back of their particular soil type or the land and/or property asset available to them. Funding is often key in order to grow and expand, and a sound understanding of the business and management is a fundamental factor when looking at those successful rural businesses.

Cash flow

Agriculture is generally heavily dependent on working capital; sowing a grain to sale could be upwards of 12 months and it’s not surprising to see OSR sown before harvesting the previous year’s OSR crop for instance. Take suckler cows, the time and cost involved in buying a heifer and taking her through to calving, and then selling in the fat market, is extremely long and high cost. You have to be certain that the return warrants such risk and capital outlay.

Those businesses that are successful are able to manage their cash flow accordingly. They know what working capital they need and what funds will be available in the future months and years in order to fund further expansion and growth. I’m not saying that everyone needs cash flows, some just don’t want to, but for me, they are a great tool in understanding what funds are available in the future. They help you understand, at an early stage, the implications of any blips (say a price drop of 10 per cent or a delay in BPS by four months), and can help you make informed decisions on expansion and growth. There are many instances where people have taken land under FBT’s but have simply run out of cash to farm it, forcing major restructuring.

Cash flows are also an important tool in bringing the banks along with you. Bankers are generally happy when they see there is management of cash flow; good accounts are also important, but having a handle on the flow of funds in the future is a key to making that relationship work, and in most circumstances, enable you to access more funding.

Another key message at present from George F. White is to make use of EU funding whilst it’s still around. You may have seen a sudden spate of grants being made available such as, the new Countryside Productivity Grant, Forestry Grants, LEADER, Rural Growth Programme etc. all of which are seeking to get the money spent before it disappears. They are a great way to help push forward a project or to grow and expand your business and provide help with the capital cost; yes, sometimes the paperwork and application process is a hassle, but if it contributes 40 per cent towards the capital and gets it off the ground it’s definitely worth the effort and time delay. We advise to forward plan, as firstly the process can take up to six months and secondly to work out the working capital requirement.”

For more information regarding cash flows and business management, call Louis Fell on 07966 924345 or louisfell@georgefwhite.co.uk.

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