Extolling the importance of a ‘future fit’ business

While the majority of farming businesses take a highly professional approach to assessing the viability of taking on new land or starting up new enterprises, more should adopt a similar attitude towards evaluating their existing enterprises.

Advisingfarmbusinesses tomakethemselves“future fit” to cope with the uncertainties of Brexit, the Royal Bank of Scotland’s Scottish farm chief, Roddy Mclean, yesterday urged more of those in the agricultural industry to make sure they took a more strategic view of their operations.

“While most farmers are now very good at drawing up forward budgets and critical assessments of likely technical performance while casting a critical eye over the best way to deploy assets on new land or in new enterprises, they seldom do this for their existing farms.”

Mclean said that while many of the day-to-day farm decisions were taken during hasty conversations over breakfast, there was also a need for those involved in the business to take themselves away from the daily grind and to draw up a future strategy.

He said that as well as including budgets and viability studies, such an approach should also take the aims and aspirations of all involved in the business into account:

0 Farmland offers sound security on loans

“And this can include everything from farm succession to personal preferences but it is important to establish long term goals and how they are going to be reached in order to make sure that everyone knows where the business is going.”

Suggesting that such an approach should go as far as taking minutes and agreeing an action plan to be taken forward, he also indicated that it might be worthwhile including a respected colleague as an independent chairman during such discussions.

Speaking in the run up to the Royal Highland Show – where the Royal Bank is committed to being the major sponsor through at least until 2020 – Mclean gave a reasonably up-beat assessment of the industry as a whole.

He said that as a mark of the bank’s faith in the sector, farmers who had approached the bank either for a business loan or for their annual review would be issued with a “statement of appetite” from the bank which would give an indication of additional lending facilities which the bank would be prepared to offer the business:

“And often this can help them move ahead with plans for expansion, succession or asset replacement,” he said.

But while farmland offered sound security on loans, Mclean stressed that lending criteria were based on the ability to service loans rather than the prospect of calling in any security.

And while he admitted that there might be some adjustment in the price of land if new support measures took a different form to existing ones (which were often capitalised into land and rental values) he said that other factors operating in the sector meant any changes were unlikely to be large: