Young sheep and cropping farmers can learn how to improve their profits by understanding how their business design affects their business profitability, in a new workshop series by the Mid North Young Guns early next year.
MNYG chairperson and Manoora stud breeder Rachel Chirgwin says improving understanding of business management is an important skill for young farmers.
“As farmers, we spend so much of our time focused on producing our best crops and livestock but at the end of the day our farms need to make a profit,” Ms Chirgwin said.
“We have organised these workshops to help young farmers learn the skills to ensure their business is designed to be profitable and actually is profitable.
“After all, when we do make a profit, we have some good choices – invest back into our business, invest in machinery upgrades, repay some debt, or live a bit better. Without profit, we have very few choices.”
Workshop facilitator and farm business management consultant Chris Scheid says recent ABARES data showed that SA mixed farmers returned only 2.4 per cent return on capital from 2000-14, excluding capital appreciation.
In the same time, inflation has averaged about 2-3, meaning that many mixed farmers’ production businesses have not advanced beyond inflation.
“To a large degree, business profitability comes down to how the business is designed,” he said.
“Sure, seasons and prices have a part to play but so does the design of your business.
“If you have high after-paddock gross margin costs, such as overheads, finance or depreciation, then profit will be affected. The key is to know the right cost ratios and which of these ratios you’ve got right and which you have wrong. This is all in your business design.”
Mr Scheid says the source of advice to structure a business profit is important, too.
“When clients come to me with profitability issues, I find that many of their business decisions have been determined with and by their accountant,” he said. “Invariably, the accountant’s focus and job is to minimise their clients’ tax, which they do by minimising your profit.
“With the right advisor, we should be designing an optimal profit first and then minimising your tax once a profit is made,” he said.
- Workshop 1 – Friday, February 23, 9am – 5pm
- Workshop 2 – Tuesday, March 6, 9am – 5pm
- Workshop 3 – Thursday, March 15 or Friday, March 16 (1/2 day only)