Building a Brexit-ready Business
Many clients I speak to ask me how they should prepare for Brexit when the potential effects on the agriculture industry are so uncertain. It’s a complex subject, but the answer is relatively simple. They must strive to be more efficient, more profitable and as a result, have resilient businesses, which are able to endure factors out with its control such as market volatility and the potential reduction in subsidy support that leaving the Common Agricultural Policy may bring. Brexit will also bring opportunities and an efficient, profitable business is more able to take advantage of these opportunities, while less efficient businesses will just be trying to survive.
Research has found that only 5% of factors affecting farm performance are out with the farmer’s control. This suggests that the factors dictating whether or not a business is profitable is down to the individuals involved in the business; the decisions made and how they are implemented. Data from the English Farm Business Survey found that the top 25% of farms surveyed made on average £100,000 per year more than the bottom 50%. So what are the top 25% of farms doing differently?
A study by the Andersons Centre on behalf of AHDB looked at the characteristics of high performing farms. This study found a series of activities which the top performers all adhere to. While some of the bottom 50% may engage in some of these activities, they do not engage in them all. These key attributes are as follows:
- Minimising costs – research has shown that successful farms have lower costs yet greater outputs. Identifying areas in which costs which can be cut which don’t affect turnover is crucial: sharing equipment with neighbours, co-operative buying, training and incentivising staff to maximise productivity. Keep necessary staff and machinery and no more.
- Target setting and budgeting – sit down with business partners and family members to set targets at the start of the year. Create an action plan on how to meet the targets and create a financial budget/projection. Meet regularly throughout the year to discuss progress – what has worked and what can be done better? Know your cost of production!
- Benchmarking – compare the performance of your business to others. Join benchmarking groups and compare your performance to benchmarking data whether it be on AgRE Calc© or the QMS enterprise profitability figures or any other benchmarking data. Benchmarking allows you to see where the business isn’t performing, allowing you to target and improve that area. This is all well and good but benchmarking only works if you act!
- Understanding the market – identify what the market requires, be it carcass specifications or butterfat %. Keep in regular contact with who you supply to ensure you are producing what they want. Ask them what you could do to add value to your produce and again act on what they say.
- Focus on detail – the sum of small gains – identify little things that you could do better and focus on improving them. A lot of small changes can have a massive effect. Create standard operating procedures with “how to” guides available near to where the job is being done. This can be very useful to focus the mind, reduce corner-cutting and ensure inexperienced staff maintain high standards.
- Have a mind-set for change and innovation – work smart, don’t make excuses about why a job is labour-intensive and difficult. Take time to consider better ways of completing the same task. If spending a whole day thinking of and creating a quicker way to do something saves you time and stress in the future, then it is worth it.
- Continually improve people management – staff and family labour are on your side by helping you achieve your dream. Creating efficient, motivated and self-sufficient staff requires investment, both in terms of money and in particular, time. Take time to get to know staff; learn what motivates them, train and empower them and provide clear, achievable, objectives.
- Specialise – research shows that farms that focus on one farming system rather than many tend to be more profitable. Diversification has been pushed as the answer to farm profitability in recent years but diversification should not be carried out at the expense of existing enterprises. A good example of specialising, is a dairy farmer who was fantastic at managing milking cows but rearing heifers was always treated as an afterthought. Accommodation for youngstock was also poor. As a result, the performance of heifers coming into the herd was poor, so he contracted the rearing of his heifers out to a neighbouring farmer, who had better accommodation, benefiting both businesses.
Ultimately, no-one can improve and build resilience in your business apart from you. To prepare your business for the challenges and opportunities of Brexit requires change. Change in the way we think about our businesses and change in the way we operate. However, change takes courage and self-belief. At almost every farm tour of a successful business, the host’s story starts with the realisation that they needed to change for their business to survive. The successful businesses all, at one point, had to change. After all, as Einstein said “The definition of insanity is doing the same thing over and over again and expecting different results”.
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