Business models in farming

The farming industry is facing some of the biggest challenges in a generation, with developments in agricultural policy, new trade agreements and increasingly unpredictable weather, as we see long-term impacts of climate change in action.

The transition within government support in England is perhaps the most fundamental shift to farming businesses, one that will require most to pause and assess options for the future.

With inevitable change comes difficult decisions for some and creates opportunities for others. It might be time to consider alternative ways of running the business, or to pass it on to the next generation, or to bring in new skills.

Whether you are looking for efficiencies, expanding, exiting or a new entrant to the industry, one area to consider is the business model. The ownership model and the tenanted model are the most common, but there is a whole range of other opportunities to consider.

Before planning or making changes, it is important to assess your current situation. Are you a sole trader? Partner in a business? Shareholder in a Limited company? Limited liability partnership (LLP)? Part of a Trust? Perhaps you are employed, and the world of business ownership is completely new?

Whatever your current position, you should explore available options for your future. Not just the pros and cons, but tax implications and other important cosnsiderations

Nobody wants to think about negative events of the future but in many cases, they are inevitable and some cases they are a risk to your business if they are not mitigated against. People often refer to the Five Ds: Death, Divorce, Disability, Debt and Disagreement. It is important to consider the occurrence of each of these eventualities in terms of structuring your business, as well as how they are to be managed to ensure the business continues operating if the worst was to happen.

It is never too soon to plan for retirement. Do you have any plans in place? Do you have a date in mind, like the end of a tenancy? Do you have any pensions or savings? Do you know how much money you will need?

Whether you are thinking of retiring soon or a family member is coming to this stage in their life, having a plan in place is critical to ensuring yourself, your family and your business are equipped to deal with retirement.

Where are you in your agriculture career, and what are you aiming to achieve from a business collaboration? Are you a landowner looking to reduce your work hours or are planning your exit/retirement? Are you an employee seeking progression, or are you a business owner looking to achieve broader business goals via collaboration?

Before signing up for a business-to-business relationship, consider these five steps:

1. Take stock – Make a clear assessment of the assets, skills and experience you have at your disposal, and what you would like to achieve with them.
2. Find the right match – Getting the right combination of land, people, mindset and ambition.
3. Create a balanced agreement – Work out how to share the risks and rewards of new business models to unlock future farming potential.
4. Select a legal framework – Selecting the right legal framework for your business relationship, using tried and tested models to create novel outcomes.
5. Think long-term – Being prepared for the inevitability of change; creating options, optimising resources, and building business relationships that will stand the test of time.

• Contract farming 
• Grazing licence  
• Share farming 
• Equity share farming 
• Co-operative and machinery share
• Community model
• Tenancy

The contents of these webpages were produced with the Agricultural Productivity Task Force, formerly part of the Food and Drink Sector Council. The information is drawn from the handbook Business Models to Unlock Future Farming Potential produced by Fresh Start Land Enterprise Centre CIC . 

Production of the handbook is thanks to:  

• Food and Drink Sector Council 
• The former Agricultural Productivity Working Group
• Fresh Start Land Enterprise Centre CIC 
• The Central Association or Agricultural Valuers
• CLA   
• AHDB  
• Newbie   
• HSBC UK   
• NFU  
• NAAC  
• National Federation of Young Farmers' Clubs