Posted September 5, 2017 by Administrator
Many individuals use the term risk when discussing farming when they really mean uncertainty. Risks are measurable; farmers can calculate and prepare for them. Uncertainties are not quantifiable which means farmers cannot gauge them. While most people do not like to dwell on the negative, farmers cannot afford to ignore risks within their operation. Below are several risks that farmers can address and mitigate straightaway.
Clear Contingency Plans
No one likes to consider his or her mortality, but it is necessary to ensure farms continue to run smoothly during adverse events. Farmers need to make sure vital employees have a backup team in place. Backup employees can be existing staff members. These substitute workers should have all necessary skills to perform the job, so farmers may need to cross train these individuals. Contingency plans are not only in place for deaths. They allow farmers to leave the farm if needed without bringing business to a halt.
Farms are often a family operation, but this presents challenges. Power struggles and secrecy plague family businesses. These issues are particularly damaging during a transfer of leadership. Almost all family businesses suffer from communication problems. Some examples include authoritarianism, refusing to accept blame, and ongoing disputes. Farmers can hire consultants who specialize in family businesses to address communication issues. Bringing in a third party will help keep emotions out of business discussions.
Victims of Success
While many business owners may think there is no such thing as too much success, farmers are at an increased risk of expanding at an unsustainable rate. Before taking advantage of a growth opportunity, farmers need to analyze the costs of their current operation as well as how much money they have in reserve. Farmers need to make sure they can bear the burden of increased costs while waiting for returns. They also need to address logistical elements. For example, if a farmer purchases new land two hours away from his or her home, he or she needs to determine who will manage it.
Farmers cannot remove every threat to their operation. Some are uncontrollable, such as the environment. However, several farming risks are manageable and farmers should take steps to confront them. Cline Wood can help farmers identify risks specific to their farms and suggest methods to managing them. To learn more, contact us today.
This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.
Posted June 13, 2016 by Administrator
It isn’t always easy to evaluate all of the aspects of your business that will improve its value. Though valuing a business is a complicated process, there are measures you can take to quantitatively improve the worth of your agribusiness operation.
Differentiate Your Products
Agribusiness has a low barrier to entry, which makes differentiation an important aspect of your competitive advantage. Product differentiation also allows you to price your products at a premium while making your company less vulnerable to your competition.
Multiple unique distribution channels have developed over the last twenty years. This offers your company an opportunity, as long as you understand how to manage your channels. Research the channels that will help you reach the right market for your unique products to increase your returns.
Centralize Your Purchasing
All businesses need to be able to forecast and purchase good efficiently. If you can strategically source your inventory needs while maximizing your channels you can achieve higher gross margins and will be less vulnerable to commodity squeeze.
Another essential element to increasing the value of your business is to reduce costs. This will prove that your company can continue to grow earnings even if sales values level out. Elements of a cost reduction strategy include:
- Strong cost accounting
- Research and Development
- Internal process engineering
- Streamline processes
- Stringent product life cycle evaluation
By mitigating costs, centralizing your purchasing, managing your channels and differentiating your products your company can charge more, develop your brand, and decrease your market risk. Then, when you have improved the value of your business you need to protect it. Contact the experts at Cline Wood to learn more.
Posted November 3, 2015 by Administrator
The recent drought conditions have forced some ranchers to sell livestock they would have normally kept for breeding. This can lead to a significant loss for some ranchers who are in extreme or severe drought conditions and can’t replace livestock in the four years that is allowed under current tax laws.
Under 1033 (e)(2)(B), livestock that is sold or exchanged during a drought are considered an involuntary exchange. The IRS has decided that some areas are suffering from such severe drought conditions that exemptions to the standard tax laws should be made. In all 50 states and Puerto Rico, the IRS has designated specific counties to be exceptional, extreme, or severe drought areas. Under the extension, changes have been made to how the government defines the first drought-free year base on three different criteria.
The extension may be able to help you recover financially if you are in a county that has suffered from severe drought. To help you understand how the extension works or if your agribusiness is in a designated county, you will want to visit the IRS website to read the recently released notice. To learn more about agribusiness risk management and best practices, contact us.
Posted September 22, 2015 by Administrator
When you own a commercial agricultural business, you often have to store hazardous material on your property. You may need to keep petroleum, fertilizer or chemicals in large tanks, running the risk of environmental damage from leakage. However, if you follow some basic maintenance tips, you can prevent tank leakage, save your business time and money, and preserve your reputation.
Inspecting the Seams
Tanks often develop leaks along the seams. They may be small and difficult to see at first but then the seam will rupture and the resulting leak can cause severe damage to soil and ground water. Routine inspection of tank seams will help you see when it is time to reinforce or replace a tank.
Inspect the Valves
Another common area where leaks occur is at the valves. Valves are turned frequently, the wear and tear of the consistent use can cause threads to strip, and leaks may occur. Frequent inspection and lubrication of the valves will extend their usefulness and prevent the possibility of leaks.
Lubricating the valves can help prevent them from seizing, another common cause of leaks. If a valve freezes and an employee has to break it free, then the damage to the valve may cause it to leak or burst.
Inspect the Pipe Lines
Pipelines and hoses are another possible trouble spot for leaks. They can become brittle in severe cold or they may become damaged when they are run over or struck. Sometimes lines and hoses develop pinhole leaks, which will leech into the soil for a long period before the damage is noticed. Frequent inspection of all pipelines and hoses will allow you to change out the damaged lines and reduce the chance of a leak developing.
When a tank ruptures, it can cause financial and environmental damage. However, not all leaks occur because of a rupture in the tank. Inspecting the seams, valves, lines and hoses will help you prevent some leaks before they occur and reduce the risk of contaminating the soil or local water supply. If you are interested in learning more about agribusiness risk management, read more or call us at 888-451-3900.