Turnover vanity profit sanity….what a load of tosh

B R C said:

The main point is as @Wigeon has alluded to is that farming output inflation has not kept up with imput or cost of living inflation so profit in real terms has dropped massively, the fact that lots of you are saying new machinery is not affordable demonstrates this perfectly. Just to stand still in real terms you need to get bigger, much bigger, you can only cut costs and streamline the business so much, otherwise we are just going to get poorer and poorer in real terms. Does the government care about food security and farm gate prices, of course not, silly farmers will just keep farming it whatever, cheap food for everyone is more important.

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glasshouse said:

You dont need to replace machinery .
25 yr old kit is perfectly adequate if well looked after.

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neilo said:

That’s fair enough, but at some point you will need to replace it. What then?

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glasshouse said:

You dont need to replace machinery .
25 yr old kit is perfectly adequate if well looked after.

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neilo said:

That’s fair enough, but at some point you will need to replace it. What then?

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B R C said:

You don’t, but you do need a plan and to crack on with it, doing nothing and carrying on as you’ve always done is not a plan for the future. I think my father had the best years in the 70’s and 80’s, the 90’s and noughties were ok but things are changing again now.

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glasshouse said:

This nonsense that you must get bigger is killing farming.
Getting more out of the land you have is the answer.
And not buying shiny toys.

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glasshouse said:

This nonsense that you must get bigger is killing farming.
Getting more out of the land you have is the answer.
And not buying shiny toys.

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B R C said:

Heard this said plenty of times, but really if you have a small farm turning over a relatively small amount say £1-200k you are only ever going to be able to make so much money no matter how efficient you are or how well you sell your produce. The only way to increase profits is to increase revenue and that means turnover. Lots of moaning on here about cost of red tape and lack of government support and the expectation that we should be supported, I agree we should be recompensed for any environmental obligations. We have to accept that cheap food relative to the cost of everything else is important for the world’s people and governments. In order to survive, we need to increase revenue and profit. So what’s your plan?

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Interested in farming said:

The phrase comes from business that focused on turnover to the detriment of profit margins. Clearly increased turnover equals increased profit but the game I was in (packaging) people cut margin to gain market share and ended up cutting everyone's throats.

The solution the industry came to was 'value added' - doing something to the product to increase margin. For a potato producer the equivalent would be to start chip or crisp production or to sell a premium potato (maybe washed and sorted). Challenge for farms is you don't have the scale to fully copy what we did.

Maybe some kind of co-op between groups of famers to process product and sell to the Spar size operators. I know McCains started in the US from a famer who bought a potato washer and then found he made more from washing spuds for neighbours than growing them.

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rusty said:

About 10 years ago we cut our yield back from 8550 to 7400 litres cow. Managed to rent more land so stocking rate went from 2.9/ha to 2.3/ha. Fertiliser and contractors costs went up but we cut purchased feed by 250k (330 cows). Profit increased significantly.

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SilliamWhale said:

They probably do. Bloke on twitter most likely signed the finance agreements on 4 new class combines t'otehr day

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DrWazzock said:

Yes you need to get bigger or intensify in some way to increase your absolute profit to keep pace with the rising cost of living. Or alternatively spread your investment outside of agriculture so all your eggs aren’t in one basket. I think that’s actually more sensible. Who’d want to be 100% invested in agriculture in a disastrous farming year? Also there’s very limited opportunity for people to actually get bigger as land is held onto for tax reasons. Diversify your investments in capital and time is the best way IMO. Many farmers bought buy to let’s for this reason.

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B R C said:

Heard this said plenty of times, but really if you have a small farm turning over a relatively small amount say £1-200k you are only ever going to be able to make so much money no matter how efficient you are or how well you sell your produce. The only way to increase profits is to increase revenue and that means turnover. Lots of moaning on here about cost of red tape and lack of government support and the expectation that we should be supported, I agree we should be recompensed for any environmental obligations. We have to accept that cheap food relative to the cost of everything else is important for the world’s people and governments. In order to survive, we need to increase revenue and profit. So what’s your plan?

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Beefsmith said:

Look at the business structure first because you can halve your tax bill by going ltd compared to a sole trader. That ultimately will increase your profit after tax. If you’ve already done that then yes you need to increase production to increase profits.
I’ve never paid so much tax than I have over the last 3 years and it looks like it’ll be the same for year end 23 but now I’ve changed business structure year 24 onwards will see my tax bill down by 60-70%.
Out of interest what’s peoples profit percentage of the turnover?

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Bossfarmer said:

The tax still has to be paid when you take the money out of the ltd company?

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Beefsmith said:

Look at the business structure first because you can halve your tax bill by going ltd compared to a sole trader. That ultimately will increase your profit after tax. If you’ve already done that then yes you need to increase production to increase profits.
I’ve never paid so much tax than I have over the last 3 years and it looks like it’ll be the same for year end 23 but now I’ve changed business structure year 24 onwards will see my tax bill down by 60-70%.
Out of interest what’s peoples profit percentage of the turnover?

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