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Talking business management, planning and farm succession in Australia

On the start of my second week in Australia, myself and Carlyn Sheriff headed over to Kadina for a Grain Industry Seminar, which is a Government reported programme that Rural Directions are leading at the moment, writes Brown&Co’s George Lane.

They are conducting various seminars around South Australia, talking to recruitment professionals and unemployed people about job opportunities in agriculture in South Australia.

 

This presentation explains details of day to day tasks and skills etc, which are required in agriculture.

 

It is aimed at mainly the unemployed, but also anyone interested in joining the agricultural industry.

 

This was a well-attended meeting with positive feedback mostly from the recruitment professionals.

 

Later that afternoon we headed down towards Maitland to a farm where a pre-harvest operations meeting took place.

 

The discussion at this meeting was mainly around operations and people management, along with Health & Safety.

 

This is trying to formalise the management style of the business and to make it more transparent, so everybody knows their tasks.

 

At this meeting a partial budget was looked into in respect of the potential of buying land nearby, the productive value of land was assed to determine a maximum bid for the land.

 

This was a good exercise and gave an insight into the types of land available, market values and the way in which farmers consider these market values and whether these values are justifiable.


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The following day David Heinjus and I had an advisory meeting in Adelaide with a farming family and their accountant.

 

This was mainly to discuss succession as two of the three sons are now coming back to the farm and slowly taking over the operations from their father and uncle.

 

Discussions were had as to how this should pan out, going forward, and to set a time line of goals so the family had something to work to.

 

It was noted that the culture and structure are to be the foundations of the business, going forward, and this was something the two sons need to put in place from the beginning.

 

That evening, David and I took a two and a half hour flight from Adelaide to the Gold Coast, Queensland, ahead of a 2 day governance workshop, which is a programme between Rural Directions and Dairy Australia.

 

David travels around Australia conducting these workshops so that the milk industry can attend and learn more about governance and business planning.

 

The workshop was attended by 13 farmers from the eastern side of Australia that had travelled for this workshop. The first day mainly focused on culture, values and strategy, with this leading onto practical strategic planning and policy development.

 

This was new for me and I had not seen such a workshop before which was so openly available for agricultural businesses.

 

It was brilliant that all of the attendees were very open minded and active with all of the discussions, which meant it was extremely thought provoking and the key note to take away from the morning session was that culture eats strategy. So if the culture is not set right with a solid foundation, then the strategy shall be inefficient and unsuccessful.

 

In the afternoon we looked into organisational structures and listed out the art of formalising management so that clear roles and responsibilities can be defined for everyone involved with the business. This would increase transparency and improve communications throughout the business. Risk management was also looked into, developing the framework to enable sound business and industry risk management.

 

We looked at how to measure and manage risk and how doing this can help you build a good strategy and ways of dealing with such adverse risks that may happen. This is very important particularly in Australia where weather events such as droughts can have massive effects on businesses and their finances.

 

The final part of the day’s session was spent talking about advisory boards and how these can improve managing businesses and enable strong governance. It became apparent that many of the businesses and farmers out there would benefit from advisory boards to help them build their business and stay focused on the goals that they wanted to set.

 

After talking to one of the farmers on the programme, he explained that he is willing to pay a nutritionist $8,000 to be in charge of £1m feed budget, but he has never considered paying a similar amount for an advisor to help him manage his business, which has a total budget of circa £12m. He agreed it is something he needs to do to help build his business and make it prosper.

 

The 2nd day of the dairy workshop took place, again with the day being led by David Heinjus. The morning session looked into investment principles and farm management. This led onto looking at the different kinds of corporate investment in the Australian dairy industry and what it means to be a business with an investor, which lead on nicely to looking into business models that exist in the dairy industry.

 

During the morning session people were asked to look at their hurdle rate which is used to measure the return wanted from an individual investment. This takes into account the risk free rates, margin for risk and return for effort. That gives the hurdle rate, which was a very interesting way to look at individual investments and to measure whether it will give you a financially logical return.

 

During the morning session, we looked into developing budgets to explore investments to farming businesses. This took into account inflation, which was reflected in the discounted cash flow. Working out the rates of return was very interesting and I helped David to present this to the farmers and assisted them in preparing paper based calculations so that we could all have a go at understanding and completing the discounted cash flow.

 

Everyone agreed that this was an extremely useful and thought-provoking exercise, creating a good formalised budget which clearly showed the risk and the breakeven points which needs to be considered when looking into an investment, be it from increasing the herd size through to buying a whole new farm.

 

The afternoon session looked into the investment readiness process, i.e. due diligence, whilst looking into investment from buying land to extending a cattle yard.

 

They finished off with the workshop evaluation which had terrific feedback from every participant.

 

From my point of view I thought this was an extremely valuable workshop that needs to be implemented in the UK.

 

A lot of the content has been covered before, through the likes of University courses etc., but it is one of those things that should be revisited by every business operator to remind them of the formalities and the structures which will help them succeed and become a more profitable business, along with giving a more owner/leader style of management rather than an owner/manager.

 

At the end of the week, I had an advisory board meeting in the office which was extremely interesting.

 

This meeting took 4 hours, but the time flew by. This meeting involved a large family who were looking into the succession planning of their business and how to future proof this going forward.

 

The meeting started with a catch-up from the previous meetings, to see what action points had been done. This led to looking at the bigger picture of the business. An open discussion took place between everyone to determine various opportunities through the medium of a SWOT analysis.

 

This was carried out to see what enterprises the business could go into, along with considering selling part of, or, the whole of the farm and moving to an area that would help drought proof their business, as the area they have been in has historic low rain fall and suffers from drought.

 

Once these opportunities had been put together through the SWOT analysis, a scale and waiting system was put in place so that these opportunities could be measured against one another and deemed to be suitable investments for the business goals, be this draft proofing the business, being something that they enjoy or is commercially viable.

 

This was a brilliant meeting to be part of. Everyone took part. All were open minded and openly discussed future successions to different businesses and strategies.

 

I had never really witnessed that level of open mindedness; to actually pick up and move the whole farm to a new area which would give them hopefully a better business model.

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