GRDC Grains Research and Development : Slicing the profit pie a focus of Farm Business Updates

Allocating funds to achieve business growth, risk management, capital expenditure and succession planning is an ongoing challenge facing typical family farm businesses in Western Australia.

Often there are multi-generational dependents and obligations on the farm and the relative importance of each facet of its operations varies over time.

Effective distribution of the funding 'pie' and profits is paramount to long-term business success, according to farm management consultant Ashley Herbert, of Agrarian Management.

He said keys to achieving this were the development and adoption of well-defined and objective strategic business plans and a good understanding of the financial limits of the business.

Mr Herbert will outline his tips for 'What to do with profits in a low interest rate environment' at a series of Grains Research and Development Corporation (GRDC) Farm Business Update events in February.

These annual events provide a unique forum for growers and advisers to learn from - and network with - leading industry professionals and are scheduled to be held at Borden on February 6, Corrigin on February 7 and Mingenew on February 9.

Mr Herbert said his Update presentation will focus on understanding the financial position and performance of the farm business, developing short and long-term business plans and assessing risk profiles to improve business resilience.

'Any grower knows that farming is capital intensive and annual income is highly variable, resulting in volatile cashflows and profits between years,' he said.

'Efficiency and cost control are critical to success and optimal profit allocation is achieved when there is a well thought out business plan in place.

'This plan should be aligned with short, medium and long-term business and personal goals that are realistic, achievable and include current and expected future demand and commitments for funds.

'It is also essential to understand the underlying earning capacity and variability of farm enterprises and operate within the reliable means of the business.'

Mr Herbert said it is highly valuable to know likely profit variations between years and plan for poor financial results in some years, as this was an inevitable part of farming.

'Knowing the financial position that the business might be in during poor years can help to weather the storm,' he said.

'It is all about understanding and managing the financial limits of the business, which includes knowing what profit is likely to be generated over time and current operating and fixed costs.'

GRDC Western Regional Grower Services manager Roger States said these types of business management skills and knowledge were critical to running a successful modern farm business.

'The decision-making required is becoming increasingly complex as farm businesses strive to meet the key challenges of varying input costs, commodity prices and climatic conditions,' he said.

'GRDC Farm Business Update events are designed to provide growers and advisers with information to help them undertake effective business planning and management.'

The Farm Business Update events at Borden, Corrigin and Mingenew will cover a range of topics from expert speakers, including:

• Long-term business strategy and practical processes for setting and revisiting business goals (Ag Consulting Co. director Jeanette Long)
• How much machinery should be owned and when should it be upgraded (Kondinin Group senior researcher Ben White)
• Maintaining a healthy mindset to make good decisions (Bunch Consulting's Neville Brady)

• Alternative business funding models (Price-Sevenson director Ken Sevenson)
• The dynamics between broadacre farming and labour management systems (Nuffield scholar and South Stirling grower Reece Curwen)
• Facing change and challenges with a winning plan (Australian sporting legend Ric Charlesworth).

At each of the GRDC Farm Business Update events, registration will be from 8.30am and proceedings will take place from 9am to 4.30pm. To register attendance and to pay online, visit www.grdc.com.au/UpdateDates

For Interviews

Ashely Herbert, Agrarian Management
0427 007 396
[e-mail]

Matt McCarthy, ORM
0407 344 264
[e-mail]

Contact

Melissa Williams, Cox Inall Communications
0428 884 414
[e-mail]