Building better farm businesses

Mid North Young Guns chair Rachel Chirgwin.

Mid North Young Guns chair Rachel Chirgwin.

Young sheep and cropping farmers are learning how to improve their profits by understanding how their business design affects their business profitability, in a new workshop series by the Mid North Young Guns.

MNYG chair, Manoora stud breeder Rachel Chirgwin, says that improving understanding of business management is an important skill for young farmers.

“As farmers, we spend so much of our time focussed on producing our best crops and livestock but at the end of the day our farms need to make a profit.

“We have organised these workshops to help young farmers learn the skills to ensure their business is designed to be profitable and actually is profitable.

“After all, when we do make a profit, we have some good choices – invest back into our business, invest in machinery upgrades, repay some debt, or live a bit better. Without profit, we have very few choices.”

Workshop facilitator and farm business management consultant Chris Scheid says that recent ABARES data showed South Australian mixed farmers returned only 2.4 per cent return on capital from 2000-2014, excluding capital appreciation.

Over the same time inflation has averaged about 2-3pc, meaning that many mixed farmers’ production businesses have not advanced beyond inflation.

“To a large degree, business profitability comes down to how the business is designed,” he said.

“Sure, seasons and prices have a part to play but so does the design of your business. If you have high after-paddock gross margin costs, such as overheads, finance or depreciation then profit will be affected. The key is to know the right cost ratios and which of these ratios you’ve got right and which you have wrong. This is all in your business design.”

Mr Scheid says that where you get your advice to structure a business profit is important too.

“When clients come to me with profitability issues, I find that many of their business decisions have been determined with and by their accountant. Invariably, the accountant’s focus and job is to minimise their clients’ tax which they do by minimising your profit.

“With the right advisor, we should be designing an optimal profit first and then minimising your tax once a profit is made.”

The series of workshops will be held on the following dates:

  • Workshop 1: Friday, February 23, 9am-5pm
  • Workshop 2: Tuesday, March 6, 9am-5pm
  • Workshop 3: Thursday or Friday, March 15 or 16 (half day only)

More information here.