Only two ways to earn extra farm income
For example, it might be to tighten up expenditure, so that you can save more to give yourself a rainy day fund.
To boil financial planning down to its simplest form, there are only two ways to get more money for yourself from your existing situation — increasing your farm sales, or reducing your farm costs.
Let’s look at farm income first. In terms of expanding farm income, a number of avenues can be explored:
* Are you getting maximum market value for your farm produce?
* Are you maximising the efficiency of your farm, is it producing as much farm produce as possible?
* Are there alternative enterprises which are more profitable than the enterprises currently operated?
* Are there Department of Agriculture schemes which could help?
* Is there the possibility of earning off-farm income to supplement existing farm income?
Looking at each of the above, it is possible to start painting a picture of what actions are needed to increase your farm income. Let’s look at maximising the value of the farm income for a typical dairy farm. Start by asking yourself the following questions.
Is milk quota being filled, are milk solids below average or below where they should be?
Are cull cows fattened, or is there capacity on the farm to fatten cull cows?
Are dairy heifers home bred, and are excess heifers sold at a breeder’s price, or are you culling too many good cows just to make space for heifers?
Are excess calves sold for the best price possible, is your breeding programme correct to maximise value of excess calves? Should you be using different stock bulls to maximise value of excess calves or heifers, would milk recording help increase their value?
Are you maximising grass production, do some paddocks need reseeding to improve output, do you need to improve farm roadways to make more use of available grass?
Outside your existing activities, you could look at alternative enterprises to create more income. The range of options here is endless. Some options can be radical, but as a starting point, you could examine some of the following.
Are outbuildings suitable for conversion to farmhouse accommodation?
Can you make more income from farm machinery by doing hire work for neighbours?
Is there produce you can sell to the public through farmers markets?
Is there marginal land which isn’t productive and could be planted with trees, is there woodlands which you could manage to sell firewood. Are there sites suitable for wind-turbines? Are you near a town with space suitable for a biogas plant?
With regard to schemes for farmers, the AEOS scheme may be opened again in 2012 for a limited period. Is this something suitable for your farm?
Should you consider participating in dairy or beef discussion group?
If you have skills which are in demand outside of your farm — such as welding, auto-electronics, building, landscaping or digger driving — then you may wish to consider earning more from this income stream in 2012.
Once you have taken an honest look at all of the above options, you can start forming your plan to increase your income.
See what steps are needed for any of the above avenues you wish to take.
There is no point in being only partly committed to your new farm goals — only take on a project which you know you will stick to.
If you can’t measure progress, then you can’t manage it. Have a think about setting targets along the way to meeting your goal. For example, aim to have milk solids at a certain level by a certain time. When you measure your progress, you stay on track, you reach your target dates, and this spurs you on to continue the effort required to reach your goal. Set realistic targets at the outset, don’t try to take over the world all at once, or you will get dejected due to slow progress towards your over-ambitious goals. Set timelines for meeting each target, these timelines need to be relatively close, otherwise your commitment to your new project will be too vague.
Most importantly, this new plan should be written down, and put in a prominent place to remind you every day of this new goal. Sticking the plan to the fridge door is a great idea.
Lastly, this new venture is designed to add to your farm income, and although there may be costs in starting up, you need to weigh up how much this new venture will add to your bottom line.
Next week, I will look at planning for cost management and some techniques for evaluating which projects are viable.
As always, each individual’s circumstances should be looked at for the best advice.
Your questions on this and other farming tax issues are welcome.
