Writing a Farm Tenancy Tender Application
1 February 2024A farm tenancy tender application is generally a substantial document generally encompassing a business plan and projected financial budgets, along with additional information which may be stipulated by the prospective landlord.
This following guide explains and gives areas of consideration for each of the sections that would be required in completing a strong business plan and projected financial budget, with an aim on building a sound farm tenancy tender application.
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Review the Tender Before you Start Writing
Before you jump into writing your business plan, ensure you have read and understand all of the conditions within the farm tender documents and visit the farm to get to know the farm under offer. If required, seek assistance in understanding the terms from a solicitor, agricultural consultant or mentor.
Set out your ideas on paper first, often business ideas and plans are interlinked so a mind map is often useful just to spill all of your ideas onto paper, after which you can refine them in preparation for writing your business plan and financial budgets.
Business Summary
Begin your report with an overview of your current business, include your business name, address, business structure (sole trader/partnership/limited company etc.) as well as a short overview of your current business operations. Include your mission statement and vision for your business. Try and keep this section concise and no longer than one page long.
Background
It is essential to sell yourself to prospective readers in this section of the business plan. The following information is beneficial to display:
- Personal background
- E.g. brought up on family farm/first generation new entrants/ previous employment and how this relates to agriculture or would fit with the business.
- Experience
- E.g. previous agricultural experience, instil the confidence in the landlord that you have the ability to run and manage a farm.
- Qualifications
- How these will assist in ensuring you in being an excellent tenant.
- Future aspirations and how farm tenancy fits in with achieving these goals.
Proposed Farming System
Detailing your proposed farming system on the farm up for tenancy tender gives the landlord an insight into how you propose to farm the property. Some landlords have a particular aspiration or impression of what type of tenant they may be looking for in advance, this could be down to a particular farming system suiting the land/farm or a potential diversification venture – this will be stated in the farm tenancy application documents.
An invaluable tool when completing business plans and financial costings is the Farm Management Handbook – it can give your typical rental values, enterprise budgets and more. Available here:
Farm Management Handbook (fas.scot)
This section of the business plan should form the greater part of detail surrounding your plans and aspirations for the farm tenancy under tender. Breaking down the sections as follows makes it clear that you have considered all aspects of the farm on offer:
- Rent
- Consider what is a viable rent to offer for the farm after you have been through the business planning and financial forecasts.
- Land
- Detail what your plans would be for the land.
- How you would manage grassland?
- What arable crops you may grow and how much?
- Livestock
- Specify which types of livestock (if any) you would have on the farm, explain why. The type and topography of the land may play part in these decisions.
- Investments/improvements
- List any substantial investments and/or improvements required, such as ingoing valuations, livestock, fencing, drainage, lime applications, machinery, the reason for them and build this into your projected cash flow.
- Funding
- Consider what funding may be available to you, including Basic Payment Scheme payments and any capital funding grants. A caveat should be placed on competitive funding schemes as it isn’t guaranteed funding will be secured in all cases.
- Environmental management
- Contemplate whether there are any designated sites on the farm or areas of environmental interest.
- Do you plan to enter into an agri-environment scheme and what benefits would your farm management bring?
- Diversification
- Consider whether diversified income to the farm business will work with the resources you have available. Always enquire with the landlord that diversification activities are permitted and on what terms, as a landlord may wish to negotiate separate terms for non-farming diversified income.
- Labour
- Detail who is going to be working on the farm and whether additional labour is required in the form of contractors for specific tasks throughout the year.
- Equipment
- What equipment/machinery is required for you to be able to run the farm successfully? You may already have some equipment at your disposal, but it is useful to list the most essential pieces required and how these are to be used.
- Mentor
- Starting out in a farm tenancy is challenging for any farmer, even more so for new entrants – it is a good idea to establish a mentor for you and your business to help you through the first few years in business. You can find more information on the FAS New Entrants Mentoring service here: https://www.fas.scot/mentoring-new-farmers-crofters/
Financial Forecast
A financial forecast helps to estimate the flow of cash into and out of your farm business over a twelve-month period. As part of a farm tenancy application, the projected cash flow is usually requested for a three or five-year period. It is widely understood that it is difficult to predict this far in advance in any business, particularly in agriculture, therefore it is advised that projected budgets should be reviewed annually to monitor business progress.
This part of the application is important to help display that the proposed business is able to trade successfully, be able to pay it’s rent to the landlord and that consideration has been given to the peaks and troughs of the farming calendar. Completing such a task also helps to highlight where additional working capital may be required, where the business may wish to consider an alternative income stream to bridge the gap.
The following areas should be detailed within this section of the business plan, with a copy of the cashflow documents attached to the report:
- Capital requirements and sources of finance
- The cash flow will help to identify the capital requirements of the business, this then opens the necessity to display how this venture will be funded. Detail sources of finance within the business plan (e.g. personal savings, loan, overdraft).
- Budget assumptions
- Catalogue each area of income and expenditure in the business and roughly which month it will take place. This is useful for when completing the projected cash flow, allows you to track income/expenses and make tweaks and changes as time goes on.
- Gross output analysis
- Analysing the projected cash flow figures gives a good indication of the output and cost structure of the proposed business, also ensuring that the numbers detailed are sensible and realistic. FAS has a Toolkit to help in analysing farm accounts and projected budgets, which can be found here: FAS Toolkit | Helping farmers in Scotland | Farm Advisory Service
- Demonstrate the business model covers cash needs
- Provision of a livelihood for the tenant farmer(s), maintenance of business assets and infrastructure in good order with sufficient growth to enable business survival over the long term.
FAS provides a range of budgeting and financial planning tools online, which you can access here:
Budgeting and financial planning | Helping farmers in Scotland | Farm Advisory Service (fas.scot)
SWOT Analysis
A SWOT (strengths, weaknesses, opportunities, threats) analysis is a technique used to analyse these four aspects of your business at any stage. The process allows you to view your business from multiple perspectives, highlighting what you are good at now, with the potential to highlight areas for improvement, new prospects and to put in place barriers to strengthen business resilience. Overall, the SWOT analysis can help formulate an effective business strategy for the future. Further details on how to complete and what to consider for a SWOT analysis can be found here:
Strategic planning | Helping farmers in Scotland | Farm Advisory Service (fas.scot)
New Entrants Tenancy Success Stories
Top Tips
- Be truthful and realistic. Stay grounded and ensure that the business plan encapsulates all aspects of your future plans for the farm tenancy, these should be fully costed and included in the projected cash flow. Omitting investments/improvements required can really distort the business performance.
- Involve all members within the business when forming the business plan, this ensures that everyone is heading in the same direction and knows the plan and business goals. Note that the plan isn’t set in stone and can be reviewed and updated when required.
- Make your farm tenancy application personal; highlight how this opportunity will help you meet your goals, what qualities you bring and how this relationship can develop. If you are not confident in preparing your own business plan and financial budgets, seek support from a farm consultant or mentor.
- Know your plan inside out. If you are selected to get through to interview stage, you will be cross-examined on details within your farm tenancy business plan, this is a chance for the landlord to get to know you and scrutinise your knowledge and expertise. Even if you have enlisted assistance from a consultant in completing your application, take the time to be involved in the majority of the plan and understand how all of the details are interlinked.
- Re-work and revisit your business plan and projected cashflows for each new tenancy tender process that may arise – tailor it to suit the farm on offer and make real considerations on how each different farm would work for your business.
We wish you the best of luck with your tenancy tender application!
Samantha Stewart, samantha.stewart@sac.co.uk
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