Eight factors set apart top-performing farms from the rest, according to an AHDB Horizons report compiled by farm business consultant Andersons.
The report measures performance by dividing the income from the farm by the costs associated with it, to produce a figure for return on turnover.
The strongest message to come out of the guide relates to overhead cost control, with the top performers in all sectors having lower overheads than the rest.
Designed as a guide to improve performance, the report takes each factor and suggests how this can be tackled, using farm case studies.
8 factors of top-performing farms:
- Minimise overhead costs
- Set goals and budgets
- Compare themselves with others and gather information
- Understand the market
- Focus on detail
- Have a mindset for change
- Continually improve people management
“One important aspect is that these characteristics are not ones that require huge capital investment, but are much more about doing things differently,” said Phil Bicknell, AHDB market intelligence director.
“What’s more, they all sit firmly within our scope of influence on farm.”
Higher output accounts for 10-30% of higher profits in top-quartile farm businesses, while lower costs contribute 65-90% of higher profits, says the report, which includes farmer-to-farmer advice.
The report also found that more than half of farmers in the lower 25% bracket did not realise they were underperforming.
Conversely, higher performers constantly question and seek to improve – they tend to attend discussion groups on business management and other issues.
They also use key performance indicators to measure how they are doing.
Good communication with buyers and knowing about the market they are selling into is also a feature of top performers, who make the effort to visit customers’ sites, learning how value can be added.
They work on developing and maintaining good trading relationships – for example, by understanding the importance of speed of loading or conforming to delivery and other requirements.
The report accepts that concepts such as focusing on detail are not new, but emphasises the importance of making as many small gains as possible, which can add up to a significant improvement in overall performance.
Horizons performance findings
- Top 25% farms, across all farm types, perform 1.8 times better than the bottom 25% – a huge difference in profit terms.
- In 2014-15 to 2016-17, the bottom 25% lost £34,600 a farm from agriculture and lost £11,200 overall after subsidies and diversification.
- In the same period, the top quarter of farmers made £42,000 from farming and more than £115,000 in total.
- Less than 5% of variation in farm performance is related to geographic factors, such as soil and climate.
- More than 70% of the difference between top and bottom quartile farms is due to decisions made by the farmer.
- The factors a farmer cannot change are mostly of small importance to performance.
You can find the report, “Preparing for change: The characteristics of top performing farms”, at the AHDB website