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What action can individual businesses take to survive?

Family farms have always been part of our countryside, but numbers have been declining as the pressure on farming increases, and through lack of succession, as the next generation choose to move away from the farm.

There are a number of threats to family farms, and these include:

1) A recent report for the Princes Trust (published June 2016) shows that the average proportion of Farm Business Income that comes from subsidy is 165% (small mixed farms), so subsidy reform is a very real threat to the future.

2) Changes in family circumstances, which have meant that farms are being split up more often than in the past

3) The greater ability of large scale businesses to pay high rents and add parcels of land to their businesses, spreading the costs over  a large area base often makes it difficult for small farms to expand

4) Lack of funding or incentives for ‘young farmers’ to come into the industry, has made the cost of entry prohibitive.  This has been compounded by the fact County Council holdings are increasingly being sold rather than let out, thereby taking away a slightly less costly method of entering the farming world.

5) A wish for ‘fairness’ for inheritance purposes has also tended to cause more farms to be split up between families when there is a generational change.

6) Cost of growing the farming business can be a significant pressure as any investment that needs to be funded, whether machinery, land or animals adds to the financial strain. 

So what can a family do to help them succeed:

1) Keep improving your technical knowledge – learning continues throughout a career, and using advisors and specialists to build on your technical knowledge, as well as attending workshops, farm visits, etc. all help to give new ideas and different ways to do things that may benefit the farm. 

2) Having a good professional team around to help the business can be a real boost 

3) Be open and honest with all family members and do it early on – if the farm is a good business but not big enough to be split, identify a successor and put other plans in place to look after the others.

4) Be aware of the financial implications of any business investment (machinery, buildings and land) – what is the time needed to repay the loan – is it realistic and can you afford it? 

5) Evaluate whether rents are adding value – if taking that extra land is going to make no contribution to profit do not take it.

Being organised, realistic and having a sound grasp of your financial position together with good information will always help you to make good decisions.