Step 5 – Thinking long term

Rural businesses operate in a dynamic environment – markets for products and services come and go, standards and legislation evolve consumer expectations change, technology moves on, experience grows, and new skills are developed. All too many land and business relationships start off well, with optimism and good intentions, only to falter when it comes to reviewing the business, especially around the financial side of things.

Getting the right balance of reward is never easy but it is critical to the success of the relationship. The contribution of both parties must be understood and properly recognised. This does not just mean the financial contribution; it also has to take proper account of the skills, physical effort and emotional contributions that are so important to making the business work.

Some things that help make the relationship last: 

• An open and frank relationship that builds and maintains trust
• Common objectives – understanding and respecting each other’s interests
• Ensure regular dialogue throughout the agreement and not just leaving it until the official review date. This could be weekly, monthly, six monthly depending on the business model type, but the more regular the conversations the better the collaboration
• Keep notes of suggestions, ideas and requests which may lead to any alteration of the agreement longer term
• Flexibility – being open to new ideas
• Willingness to learn from experience
• Recognising and valuing interdependence – sharing problems

Before writing your contract make sure you have thought about the following: 

• Where does ownership lie? Is the ownership of any assets going to change throughout the life of the agreement? Think about current assets and fixed assets which could fall under tenant improvements.
• Decision making. Does one party have the overall say in decision making? If they are agreed decisions do you have a plan in place for differing opinions or if many partners is it a majority vote scenario?
• Length of agreement. If it is a long agreement, it may be worth building in review time of the contracts, for example if it is a 15-year tenancy there may be 5 and 10 year reviews to allow discussions about investment  
• Do you need to retain active farmer status? Specifically relevant for the landowner, active farmer status is important for Inheritance Tax and scheme applications. 
• Options for releasing capital. If the contract is over a long period, or perhaps covering a time of your life where your priorities are changing, you may need to build in the ability to release capital from an agreement. From a landowner's perspective this could be reducing the land area in an agreement to enable a sale or enabling an equity share arrangement
• Do you have the skills you need? Do you have the skills to fulfil your agreement or do you need to involve another party or employ someone to meet the gap? 
• Do you have a will and power of attorney set up? In case of an accident, illness or the worst was to happen are you prepared that your wishes can be carried out and any dependants you have will be looked after, be that spouse or children. Do they know what they need to do in order for business to continue (if that is the intention)?