Farm partnership: Focus on the potential benefits
Good place to start is to talk through the practicalities
“A partnership is simply a business arrangement that benefits ” all parties involved
A partnership with another farmer can improve your work-life balance and grow your farm business, says Tom Curran of the Teagasc Rural Economy Development Programme, in his article in the current edition of the Teagasc/agricultural Trust Todays Farm magazine.
A partnership is simply a business arrangement that benefits all parties involved. There is no time limit, discussions should take place over whatever time period is required by each partner to get their head around the idea. The key issue is to work through the various steps in bringing two farms together into one business, where the profits will be shared on an agreed basis.
What is the first step?
>> The initial approach is not easy. How do you approach another farmer about the possibility of working with them in a partnership or some other business arrangement?
Firstly, you must think carefully about the benefits that could be gained by both parties. These benefits can include more labour availability, both parties enabled to take time off, and opportunities to increase scale, improve efficiency, and enhance the work-life balance. In most cases, a farmer already has someone in mind they would be happy to work with, because they already have experience of working with them in some capacity. At the end of the day, in making that initial approach, all you can do is suggest that you are interested in working together in partnership.
Focus on the benefits and give the other party time to digest what you have said.
What comes next?
>> If the initial approach is successful and the other farmer is interested in exploring the idea of a partnership, a good place to start is to talk through the practicalities. This will lead to development of a physical plan that sets out where the farmers are now, and what changes are needed to bring them together. These steps may include discussion on: Land: location, quality, linking-up.
Farm infrastructure: linking
■ roadways, water systems, paddock size.
Farm buildings: Milking facilities,
■ animal housing, slurry and soiled water storage. Livestock: valuations, sales,
purchases, breeding policy, etc.
sales, purchases. Establishing the capital
cost of any works required to bring the farms together, and prioritising the investment and setting timelines around those priorities.
What should the financial plan ■
>> Using the information from the physical plan, a sixyear business plan should be drawn up to show what the business can deliver in terms of cashflow and potential income to both parties. Included in this financial plan will be a prediction of technical performance based on the previous performance of one or both farmers. This plan should be updated each year with actual performance once the partnership is up and running.
How can partners establish a ■
healthy working relationship? >> A healthy relationship is based on good communication, honesty, trust, reliability and transparency.
At the beginning, it is very useful for each partner to do a personality profile. The focus of this is for each partner to answer the question: how well do you work with others? The profile will establish each partner’s personal attributes, values and life skills. It is vital information which will ensure that both are on the same page with regard to the farm business. One of the key advantages of working with another person is the increase in skills and abilities brought to the farm business. A skills assessment is done by, firstly, identifying the skills needed to run the business effectively and, secondly, each partner writing down their own skills.
The third part is for each partner to rate their own ability on each of the skills identified. This process is very worthwhile. It can help to identify key strengths, areas where up-skilling is required and it can also feed into the discussion on roles and responsibilities within the business.
What services can help with
setup of a partnership?
>> Up to this point, the farmers themselves and their families were involved, plus the input of their Teagasc adviser when drawing up the physical and financial plan. For the following steps, the farmers will need the advice of their respective solicitors, accountants, banking institutions.
In getting the partnership structure established, each farmer will need to get the advice of their accountant, from a tax perspective.
They will also need to speak with a solicitor who will advise on the legal agreement and the key elements required in that document.
Key set-up tasks include: Completing the legal partnership
■ agreement dealing with farm assets, profit share, and exit provisions. Completing the on-farm
agreement dealing with roles, responsibilities, time off, drawings, salaries. Deciding on a partnership
Setting up a current
account in the name of the partnership. Exploring any issues in
relation to insurance. Making changes to herd
Ensuring basic payment entitlements
■ are transferred in accordance with any changes to herd numbers.
A template partnership agreement is available at the following link: www.teagasc.ie/rural-economy/farmmanagement/collaborativefarming/ registered-farmpartnerships/registrationdocuments/
In most cases, a farmer interested in a partnership already has someone in mind they would be happy to work with, because they have experience of working with them in some capacity.