Your FBT Must Have Competitive Advantage14th August 2018
“There is certainly no decline in the demand for people looking to rent farms, so anyone looking to take on a Farm Business Tenancy (FBT) needs to ensure that they and their application stands out from the rest”, this is the message from Matthew Wallace, Associate & Chartered Surveyor, for H&H Land and Property.
With the impending departure of the UK from the EU in 2019, and the resultant impact on subsidy and potential price volatility that it may bring, it is absolutely essential that applicants submit a business plan that is both robust and financially secure.
Typically, farms are let with a term of between 5 and 15 years, which in farming terms is not a long time. H&H Land and Property have, so far this year, let three farms; Slealands, Pond House and Morton Sceugh, and each received a large number of tenders. In all instances, the successful applicants demonstrated experience, knowledge and an in-depth understanding of their proposals.
Here, Matthew gives some advice on how to make both yourself and your application stand out:
Any prospective landlord is looking for an applicant who has breadth of experiences, you really need to sell yourself and your family and detail everything which is relevant. This should include; training, qualifications, travelling, work experience, previous jobs, involvement in clubs and societies such as the Young Farmers. Detail any land or property which you currently own or rent and advise whether it would be retained if you were successful.
Proposed farming operations
You cannot prepare a tender if you have not seen the property, so attend the viewing days, meet with the landowner and agent to build a rapport, walk the farm, inspect the buildings and ask questions.
Your business plan needs to be realistic and relevant to the quality of land and availability of shed space. Provide an overview of each enterprise you are proposing to operate including stock numbers, breed type and sale timings.
For each enterprise, give an overview of the farming year and demonstrate how it relates to the farm, such as referencing to the actual building you intend to lamb in, store forage or house cattle etc. The devil is in the detail, and you must show the landlord and their agent that you have really thought out your proposal.
Investment in the farm
The landlord is looking for a custodian, so any tender must demonstrate that you intend to invest in both your own business and the farm. Investment needs to be realistic and proportionate, so include an annual investment program that sets out repairs or improvements, with estimated cost.
Finance is two-fold. First you need to provide an overview of your current financial situation. This includes calculating your assets and liabilities to get to a “current net worth”.
Next you should provide a 3 year cashflow forecast which sets out planned income and expenditure on a month by month basis. This allows you to see months which cash is short, and make adjustments. Always provide a descriptive set of notes to accompany your cashflows.
There is a general presumption that the most important factor an application is chosen by is the rent, however, in our experience, the landlord will make a decision after also considering the applicant, attender and the interview process. When proposing the rent, it is vital that you make sure it is both affordable and economically viable and that the business will have enough in surplus to reinvest in the farm. It is not in a landlord’s best interest to have a bankrupt tenant within 3 years!
Finally, as with any long-term business plan, you should identify both the positive and negative factors which could influence your business. An analysis which identifies the strengths, weaknesses, opportunities and threats will demonstrate to a landlord that you have a deeper and wider understanding of the general market.
Taking BREXIT for example, in the event of reducing farm subsidies in the future, this will have an implication on farm incomes and potentially on the affordability of the rent payable. However, opportunities such as increased farmgate prices, due to new trade agreements, may provide a boost to farming businesses. By listing examples in your tender, you are demonstrating an understanding of these variables.
“In addition to properties that we are marketing, we also assist and advise potential applicants with their farm business plan, something which is an integral part of any rental tender submission.
In summary, in order to be successful in securing your rented farm in such a competitive market, you must show in your submission that you are a farmer who has knowledge, experience and very importantly vision”, concludes Matthew.
For more information, please contact the Carlisle Office of H&H Land and Property on 01228 406260, Durham Office on 0191 370 8530, Kendal Office on 01539 721375, Thornhill Office on 01848 260395 or Newtown St Boswells Office on 01835 344860.