Whether you have a legal, tax, insurance, management or land issue, Farmers Weekly’s Business Clinic experts can help. Here, David Green from Savills offers advice on tendering for a farm tenancy.
Q. A block of 750 acres of arable land is up for rent from next spring and I’m interested in submitting a tender.
What is it that the landlord is really looking for in the application, over and above answers to the questions in the tender form?
A. The best place to start is to focus in on the application. The landlord or agent will ask for specific details to be provided to ensure they have sufficient information to be able to select the most appropriate tenant.
Even if you know the farm, it is imperative you attend the viewing day and introduce yourself to whoever is hosting the day or acting for the landlord, and to whoever may be involved with the farming.
Sometimes, wrongly, the viewing is led by an older family member of the business when it may be the younger generation or a farm manager who will actually be best placed to answer any farming queries.
Tender forms commonly ask for a lot of detailed financial information: profit and loss budgets, cashflow forecasts and the business’ balance sheet information.
Do not hesitate in providing this information; it is essential to the application and a landlord will treat it confidentially.
The preparation of the budgets and cashflows can be a good exercise for the business, and other benefits may come out of the process, such as analysis of costs of production, liquidity of the business and profit analysis of different enterprises.
The template can always be rolled out again for future tenders.
Do not try to compare your tender to others that you know may be interested, and never try to match or exceed someone else’s tender level; your offer of rent should be wholly specific to your own business.
The amount your business can justify may not be comparable to what another, albeit similar, business can tender.
Once your bid is submitted you have to be confident in your proposal, knowing that you can pay the tendered rent for the duration of the term.
Although every tender submitted will be different, it is likely that the rents offered will be in a relatively small range. Therefore, an important part of the selection process is the information regarding the business.
There will probably be a lot of tenders – if it is an open process there could be 20 tenders for a farm such as this. Therefore your application should be precise and concise. It needs to set out who you are, what you do, and why you would be an ideal tenant.
Tenants are trusted with valuable landed assets that the landlords may want back in future.
Do not just state what you will do to look after the landlord’s resources, including the soils, but show what you are already doing either on your own land or within existing tenancies.
You are looking to sell your business on a sheet of paper which many find difficult – do not be shy about your achievements and successes.
Credibility of the numbers is key. They will be scrutinised by someone with detailed agricultural knowledge to ensure the business plans are viable.
At the interview stage expect to be questioned on the figures: how you arrived at profit levels, how borrowing will be repaid and loans serviced.
If you employ a consultant to prepare the budgets, make sure you fully understand the figures and implications of a change in the headline levels of income and expenditure.
After the interview, or maybe as part of it, the prospective landlord or his representative will want to visit your own farm. It is imperative it is clean, tidy and buildings are well maintained.
Throughout the whole process be positive about the industry, show enthusiasm and dedication to the future of the land and that you are committed to the long term, for the benefit of you and the landlord.
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