Analysis Masterclass
The perfect entrepreneur does not exist
According to Peter Pals, director of Farmers Funding, the perfect agricultural entrepreneur must have 6 qualities. However, no one is perfect. Is collaboration the key to success? The company is trying to answer this during a series of master classes.
Financial consultancy organizes under the title 'Collaboration or Top Financing' Farmers Funding a number of master classes spread throughout the Netherlands. The subject of collaboration is highlighted by Dik Kruijthoff from arable farming company Novifarm. Since 2007, this company has experience in jointly running a large-scale business.
Those who want to grow can choose a number of directions; for example, knocking on the bank's door, looking for external investors, starting a crowdfunding campaign or collaborating with a colleague. In all cases, scaling up is central. This leads to fewer entrepreneurs. "Only 15% of entrepreneurs buy land," says Farmers Funding director Peter Pals. "Many people drop out, while the group of buyers remains 15%."
6 properties
According to the director, a top entrepreneur must have 6 important qualities. The saying 'it's not the tent, it's the guy' also applies to agricultural entrepreneurs. Banks and other lenders increasingly value entrepreneurship. Craftsmanship is still number one, followed by knowledge in the financial and economic field. However, the entrepreneurial profile differs per company.
In the presentation he puts these qualities in the middle of the top 6. At the top is organizational talent. It is striking that personnel management ends up in 6th place. Purchases and sales follow on platform 2. “You can make money through trade,” he says. "A large company quickly purchases for €425.000 products such as crop protection products. If you negotiate this deal and save 1%, you are talking about €4.250. This also applies to playing the free market correctly: 1% more profit yields thousands of euros."
"Good entrepreneurs can negotiate their purchases and sales," he continues. "But be careful; when negotiating you try to obtain a better position. If you put someone against the wall, you only do that once."
Growing: how?
Growing in soil not only requires a lot of your entrepreneurial qualities. It also leads to an increase in cost price. Cost price reduction through economies of scale proves difficult to implement in practice. To combat the cost increase, it is an option not to borrow from the bank, but to opt for alternatives: leasing, renting or collaborating. These options can have a major impact on your financial balance, as various calculation examples in the presentation show.
Anyone who talks about land purchases cannot ignore the prices. “Figures show that land has increased in value by 15% in 150 years,” says Pals. "A fixed interest rate for as long as possible at the current level is desirable. Due to a changing policy, repayment in 30 years is now mandatory. A few parties still offer a period of 50 years in order to distinguish themselves. Speaking about falling land prices is dangerous. No one knows for sure. An adjusted banking policy, possibly forced by the government, can change this."
"In addition to banks, private investors are also active on the land market. These are also business people. The interest rates they charge are often double that of the bank. I have not yet come across anything below 5%. Leasehold through agencies such as Fagoed and ASR have not always worked out badly in the past. Pay attention to the small print regarding the indexed loan (canon). The amount of this ground rent percentage can be considerable. The conclusion is that a combination of purchasing, leasing and renting is often best. "
Growing through collaboration
A company that has ample experience in combining these options and collaboration is Novifarm from Numansdorp (South Holland). The arable farm consists of 3 active partners and a number of silent partners who have contributed land. This allowed the company to grow from 11 to 300 hectares in 860 years.
It is quite special that partner Dik Kruijthoff does not see growth as a goal. "The current company size suits us well. We are not actively looking for silent partners to increase our acreage. In the past decade, significant investments have been made in mechanization and storage capacity. We are now working on projects to better sell our products. This is how we deliver chips potatoes to a unique fast food chain and we are starting the 'GraanWaard' partnership. Within this framework we supply dairy farmers in the Alblasserwaard with wheat, as a replacement for soya in their ration."
120
hectare
Working hours
Kruijthoff can substantiate Pals' claim with carefully kept figures. Scaling up does not always lead to cost reductions. Novifarm's experience is that 100 to 120 hectares per FTE (1 full-time employee) is average in the southwest of the country. "A large part of the hours worked on our company cannot be attributed to just one crop," Kruijthoff shows. "Wet years are clearly recognizable in the multi-year comparison. All hours are reimbursed to the partners and employees. Currently, recording still has to be done manually, but an app will soon take over."
Some of the unallocated hours arise from the consultation. A successful collaboration depends on consultation. Kruijthoff and his fellow partners are firmly convinced of this. "This means a fixed consultation moment every few weeks. We do not count votes. The support for a decision must be unanimous. Modern communication tools such as WhatsApp help us enormously. If there is an offer for a batch of onions, this can be discussed quickly. Partners who are involved in daily business operations have their own expertise, in which they can also operate autonomously. In this way we try to combine all important facets of entrepreneurship in 1 company."
Niels van der Boom
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