Growth Opportunities For Your Farm
Today, I want to look into growth opportunities for your farm through purchasing more country versus increasing productivity.
As you know, the price of land has gone up significantly in recent times.
Dollars per cow area or dollars per average yield of grain have become more expensive in terms of value, yet many of the farmers we’ve been talking to have been thinking about growth and expansion.
Purchasing More Country
We recently had a meeting with our clients who were looking for growth opportunities for their operation.
One of their options was to purchase a property further afield.
While purchasing country 1-3 hours down the road may seem feasible, there are pros and cons to consider before making your decision.
- Driving time could add up, but it can also be good thinking time, (and there are plenty of great podcasts!)
- You will need to consider if you’ll need more gear for the new property, things such as motor bikes, tractors, etc.
- Is the property big enough to employ another labour unit so you don’t have to go there as often? Questions like these can save you a considerable headache down the track.
Buying the property next door can be a better option for growth, but you want to buy it at reasonable value.
I have looked at this with some other clients recently, in one instance, the property was going for a considerable sum.
With the good seasons we’ve had coming out of the drought, it could be tempting to take on four or five times the debt you’re used to. However, this could prove a real challenge, particularly if we return to more dry seasons.
The consideration here should be things like your ability to service the loan.
It may be able to be done from a security perspective, but it should be researched thoroughly before deciding.
Serviceability is paramount with Year In Year Out cashflows prepared that stress-test projected cashflows.
And if it’s growth you’re looking for, you might want to consider your time frames. If you go heavily into debt, it might be a while before you see a return.
Increasing Productivity
The one thing that’s often overlooked is increasing the productivity of your own patch.
Rather than going into debt to buy the place next door or looking further afield, it’s worthwhile looking at your current property and identifying what can be done to make it more productive.
To find out where you might be missing key opportunities for growth on your farm, try our Farm Business Success Scorecard.
- Can you increase the carrying capacity of your property by 20% by investing in pasture improvement and fertiliser?
- Can you look at capital improvements, like water, that may increase the grazing capacity of your property?
- Can you look at improving things from an efficiency perspective? What is the present layout? How could your fencing and laneways be affecting efficiency?
Finding your quick wins and picking the low hanging fruit is the quickest way to gain momentum for further growth. While it’s easy to get caught up in the idea of expansion, you could be missing out on the golden opportunities awaiting you in your own backyard.
Looking at your current property with fresh eyes can be an invaluable exercise. One of the key aspects of our Farm Business Success Program is finding the opportunities most available to you and taking advantage of them at the right time.
To learn more about our program, click Here.
