Asset Rich and Cash Poor

There's the old adage in agriculture that all farmers are asset rich and cash poor.

I learnt this as a child when visiting a neighbouring farm who's owner epitomised the hard-up farmer look. Worn jackets, machinery in need of mending and always complaining about price. He died in 2005 with a net worth of over £4million.

These maxims hold true for a reason and, I'd argue, are even more apparent today.

With the average price of arable land in England at £10,600/acre, it would only take a mere 100 acres of arable land to be considered a millionaire. Not bad by any stretch of the imagination.

But I believe, as an industry, we can do better than that.

We are bombarded with stories of farmers struggling to make ends meet. Being driven deeper into dept and suffering a series of mental health issues - brought on in part by financial stress and worry.

Not the image of a millionaire most would imagine.

This scenario is being driven by the insatiable demand for land and it's environmental benefits coupled with the dwindling returns on the food derived from it.

We can debate the ins and outs of that argument later. But for now, I think we're selling ourselves short. I think we should be aiming for more.

I believe we should be striving for farm businesses and their owners to be both asset rich AND cash rich.

But it's not going to happen doing what's always been done. We need to change our thought process and outlook.  

And there are plenty of examples out there. Farm businesses diversifying into wineries, holiday lets, storage facilities, renewable energy and environmental projects. All adding additional revenue and allowing us to be better off in the here and now rather than just on paper.

So I say to hell with the old adage. We can do better.

The opportunities are there. We just need to grasp them.

Asset rich and cash poor? Here's how to change that....

• Take stock - write down on paper where you are right now. Yep, that means putting together a P&L, cashflow statement and balance sheet.
• Find the right balance - decide whether or not you're happy in the current situation. Is the current business generating enough revenue and paying you a fair price? If so, great, you can stop reading. If not, then things need to change.
• Set goals - decide what success looks like. Where do you want to get to? Be specific - set a destination and timeline for this.
• Take action - just do something to set the wheels in motion. Want to sell carbon credits? Great, pick up the phone and make an enquiry. Want to convert an old barn into office space? Even better, start researching the options and get in touch with your local planning department.

Until next week.....

Sandy