Foundation under company in order before you start building

I have been invited to talk about plans for new construction and the required financing. Opposite me are father, mother and the successor of a respectable arable farm.

I just told them how I view new construction a bit. They are apparently convinced that it should be possible to store as much product as possible on their own company. That filing must be of this time. The idea is a box storage with mechanical cooling. Prepare the case optimally for the successor. His father had done the same at the time. "It has to be prepared, it means keeping the future-oriented, so that our successor can continue well," say the parents in unison.

Basically I share their opinion. Land, labor and buildings form the basis of a healthy company. They must be and remain in the correct proportion. As the acreage increases, the same often applies to the need for product storage and processing. The size of the inventory also increases, usually a little slower than the acreage, as does the storage space required.

The subject is certainly important and interesting. The right, energy-friendly buildings that suit you and your company is a basic part of business operations: it must be in order. They have a good picture of the usefulness and necessity of the planned new construction.

Growing the business
The arguments for building are easily discussed: growing the company, because standing still means going backwards; sales from the country equals dependence on another; the product quality must be 100% good and this is best done in modern storage; there is always something to rent with space, it is better to rent out ourselves; better risk spreading through longer storage and distribution in sales; the tax also pays through the usual investment deduction, but also the extra scheme such as the EIA. It's an open conversation, I understand what's going on, but I say a bit cynically: "I hear only benefits?"

Then we'll talk about financing. Commercial buildings represent substantial investments for a long time. The same applies to financing, which usually runs for 20 to 25 years. Is this the right time though? Construction costs have risen sharply and builders barely have time. Or will it stay that way? Who knows may say.

The interest rate, on the other hand, is low and can be fixed for a maximum of 10 years. It is reasonable for you to first be able to explain to yourself and then to a financier - with valid arguments - that the investment will be profitable in addition to being practical. Turning left or right, new construction should create added value for the company, especially at the sharply rising cost prices. 

black binoculars
Now it may seem that I am a black eye, but that is not so bad. No, I simply want to look ahead and help develop a vision and strategy for the business; that is the most important! Building on the company is not that difficult in itself. Building your business is quite a challenge. For the first, the second, namely the foundation or base, must be or be put in order.

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Peter Pals

Peter Pals is an entrepreneur at Farmers Funding & Advies and grew up on a farm. From his farming heart, he has decided to build up a business for business, financial and tax advice for agricultural entrepreneurs.