Land values came up recently at a meeting I had with a farm family.
It wasn’t a surprise, considering that land values have been a top-of-mind subject lately at a lot of meetings.
There are usually two parts to the discussion: value and availability.
What land values will do is anyone’s guess. Same goes for availability.
The discussion is generally about land ownership, but there is definitely a spill-over into rental.
What was of particular interest in the meeting with this family was the limiting impact of high land values on growth.
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In this case, growth meant more acres, but competition for land is fierce where this family farms and not much is anticipated to come onto the market.
So, what to do?
The family believes that businesses should grow and that they run the risk of stagnating if they don’t. As well, another generation is almost ready to join the business, but the senior generation is not ready to retire. Clearly, growth is needed.
The family decided to develop a written growth strategy that included looking at various options.
The following are some of the more common business related growth strategies:
Remaining at a constant size isn’t a growth strategy but is a strategy nonetheless. Given the constraints to finding additional acres, this strategy is considered by many farms.
Increasing the number of acres is obvious. What’s not so obvious is how to do it if you’re in a situation similar to the family in question.
For many families in this situation, the strategy means being ready in case land becomes available. That means having financing in place and making it known that you want additional land.
It sometimes helps to have the next generation make the rounds in the community to let people know that they are intending to return to the farm. Some owners will want to help a younger person get started.
A strategy to reduce acreage is not so obvious. There are farms whose growth strategy is to become smaller and more efficient.
The strategy here is to diversify into other businesses.
The new business could complement the core farm, such as custom spraying, or be a non-farm venture.
These businesses can be local or distant and can have single or multiple investors. Caution is needed, especially if the investment is into a non-farm business.
Skill sets don’t always transfer to a new business. In other words, you can be a great farmer but it doesn’t necessarily mean you’ll be a great business owner.
There are different opinions on this, but generally, know what you do and do it well.
Similar to downsizing, this strat-egy results in “less” and not “more.”
Sometimes the most important aspect of growth is to let some of the other businesses go so you can focus on what you do best.
A niche is a small and unique market that usually has little or no competition. Business niches can often achieve greater profit levels.
Challenges include finding the right niche and protecting it from others who, by entering the niche, will tend to drive down prices and erode profit.
This is similar to a niche strategy and can be an outcome of an intensification tactic.
There is yet another growth option: improving or expanding management so that you can do more with and extract better profits from what you already have.
This personal growth fully complements any of the business related strategies.
Improving the management of what you have is your best competitive advantage.
