“If you fail to plan, you are planning to fail.”
As farming businesses grow, the level of planning needs to grow with the business, so the planning process becomes much more important and complicated.
At SproutAg, one of our mantras to our clients is to “get organised”. When we have this conversation with clients, we’re quite direct because we see first hand the difference that being organised can make to a farming business and the opportunities that can arise.
2023 saw a large variance in commodity prices and seasonal fluctuations that saw working capital requirements and the cost of interest much higher than anticipated. Currently, we are still facing inflation in Australia, the cost of goods has not come down and we anticipate that interest rates will remain high. But within all of this, opportunities have arisen, and it is the well organised family businesses that can take advantage of these opportunities.
To get your family business organised, these are our top three areas for you to consider in 2024:
- Getting through 2024 and what to consider
- Planning for growth with positivity
- Family business planning and generational planning
Getting Through 2024
The first step to getting through 2024 is to review 2023, and identify where your family business is at. This is achieved by using the ‘Where did the money go’ tool from our AgPro program. Following this review, you can complete three cashflow forecasts for the year, before setting up appropriate funding to achieve success.
Your first goal in working capital is to set funding limits that will cater for most scenarios, where you will only need to go back to the bank once as opposed to hat in hand later in the season asking for more. It is important to factor in higher costs and lower revenue, and to set your debt limits up one bracket for the year ahead. What we find with clients is that working capital increases were quite frequent towards the end of 2023, and they take time, so it is important to have the philosophy to tackle this only once in 2024. This is also the time to consider and work in small opportunities for your family business, i.e. livestock purchases or other opportunities.
For additional help and tools talk to your local SproutAg adviser.
Planning for Growth
If you’re planning to develop your country or farming infrastructure or looking to buy new machinery or another property, get organised and don’t wait until the last minute – plan for the acquisition and development and get the acquisition pre-approved ahead of time. Getting pre-approval can take a considerable amount of time, so it is important to get your ducks in a row early in the year to make the process easier.
It’s important to remember that growth often comes from careful planning.
Family Planning and Generational Planning
Your third area to consider in 2024 is family business planning and generational planning. You need to start by asking yourself, “What are my asset policies in the business?” What we mean by this is, you have your farming assets, and you may have three children. How do you think about your assets longer term and how do you start to set yourself up so that one day you may not rely on the day-to-day farming or trading entities.
Family businesses who do well with succession planning and transitioning start the process early, giving themselves time. There is no better time to start your longer-term planning than today!
Here are some key questions to ask yourself to get started:
Do I want my family business to continue to the next generation?
What are your family’s long-term (10-30 year) goals?
Once these long-term goals have been identified, we break it down and look at the next three to ten years:
- Where do you want to live?
- What do you want to be doing?
- What will your lifestyle look like?
- What will your asset policy look like for working and non-working family members?
- How do you communicate and set expectation early?
Find out more about our succession planning guide here.
To get your finance organised for 2024, our biggest advice is to be proactive and do something about it!