How to run a successful multi-site dairy business

The Pilkington family have taken their passion for simple grass-based dairying and developed it into a successful multi-site business.

Driven by a clear succession plan with their son Matt returning from university, in 2006 Mark and Hilary Pilkington relocated from Devon, where they were milking 120 cows on a steep hillside, to Northamptonshire.

Thirteen years on, having sold the Devon farm, the family team now runs three block-calving units – two spring and one autumn – in Northamptonshire and Warwickshire.

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Thanks to clear targets, Pilkington Farms Ltd (PFL) has turned a profit every year despite expanding from 100 cows to 1,200 and from one unit to three.

Mark says that to run a business like theirs you have to step back from the cows and focus on managing people.

“Running multiple sites is different to running a farm – it wouldn’t suit everybody. At the end of the day, without people we wouldn’t have a business.”

And that is one of the things Matt enjoys most about the business. “I believe pasture-based multiple-site businesses are a great thing. It’s a great option for a person to come in and work their way up.”

The Pilkingtons share the key factors in running a multi-site business and explain how they fit with taking on a new unit.

Step 1: Assessing the opportunity

“When we identify a possible farm, we look for its potential,” says Matt. This includes looking at:

• The grass-growing capacity of the farm
• The milking platform
• Necessary road crossings
• Stocking rate
• Understanding the rainfall and soil.

“We look for a minimum of 100ha because we know the 300-cow model is a profitable model,” he says. 

Grazing is critical to the pasture-based system, with a utilisation target of just over 10t of DM/ha/year.

“Grazed grass has to be our number one,” says Matt. “It’s wedge first, all other feed second.”

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The other key factor to assess is how the setup would work. In addition to the strong relationships between the family and the wider team, relationships with landlords and farmers for their tenancies and contracting farming agreements are “incredibly important” from a business and forage security viewpoint.

“It’s about understanding what they want out of the deal as well, so that it is a two-way thing,” says Matt, who places emphasis on improving the owners’ assets.

Several of their arrangements so far have involved arable conversion, so soil sampling and improving indices across the land has played a big part in the deal.

Step 2: Preparing a mature budget for a potential unit

 If the farm has potential, the next step is to work out a mature budget for the unit and understand what the numbers would look like in five to six years’ time.

The six years ballpark comes from experience in arable conversions, because it can take three to four years to establish and settle, and the operation should be hitting targets after four years and “flying” by five, Matt says.

The budget forecast is based on a scenario of growing 12t of grass a year and cows producing 6,000 litres from 800-900kg/head of cake.

They target a comparable farm profit (CFP) of 10ppl on a farm business tenancy and budget capital spend of no more than £1,500 a cow.

 “That’s why the tenancy has to be long enough to get return on investment,” Matt explains.

For a contract farming agreement, the budget would be assessed slightly differently depending on the terms.

Logistics of managing multiple units

To ensure budgets are met and returns achieved, each unit is run and costed entirely separately, with charges between farms if any labour or machinery is shared.

The directors aim to step back from the day-to-day running of each unit and give the herd managers autonomy, and a selection of tools helps them understand performance on each farm without having to visit.

• Cloud-based FarmWizard software is used to track herd information, such as births, deaths, movements, vet and medicine records.
• AgriNet is used to document and calculate information on grass.
• Excel spreadsheets on Dropbox are updated by herd managers daily, with information on production and prices, including details such as cows in milk, milk quality and feeding information.
• WhatsApp groups are used to communicate.

Hilary Pilkington prepares an annual budget with each team and a ring-bound version is kept in the farm office so it can be easily accessed.

Every month, Hilary reviews the budget so that any variance can be checked and acted on.

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“We have a good handle on the figures. Once you understand your numbers you can explain the reason for a variance,” Hilary says.

The budget includes detail on every aspect of the unit, including labour, fertiliser, bedding, youngstock, bought-in feed, mineral and contractor costs, as well as milk income, cull and calf income and cashflow projections.

While the business is not heavily indebted it works closely with the bank and provides quarterly variance updates.

Other key partners include Rutland Farm Vets, the Vale Farmers buying group and contractor P&R Burbage.

Targets

Physical and financial targets help keep the business on track:

Physical

• Tidy, well-presented farms
• Safe working environment 
• People retention
• Good technical performance (simple systems with the basics done well)
• 365-day compliance (every day is treated like an inspection day)
• Communication and transparency.
•  

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Financial

• Understanding and sticking to budgets.
• Costs as a percentage of income – Variable costs <30%; labour, power, and machinery and depreciation <34%; other overheads <6%; rent and finance <15%; free cash >15%.
• Pre-tax profit of £400 a cow a year.
• Comparable farm profit of 10ppl.
• Return on capital >15%.
• Growing the balance sheet to improve the business’s ability to act on opportunities.

Step 3: Working out how to run the new unit

“The biggest lesson from our growth so far is that you need the people on the ground to facilitate it,” Matt says.

“If the farm has potential and we can see it working financially, then we need people to run it. We try to operate on a people first, opportunity second principle, so we’re always looking for potential herd managers and developing our own staff.”

The business employees 10 full-time staff members on the cow side and one full-time tractor driver.

Each unit has a herd manager who is responsible for the team’s workload and rotas as well as cow performance and grass management.

Having one autumn-calving and two spring-calving units allows some labour to be shared.

The youngstock manager moves between the different units for the calving periods, allowing her to apply the same rigorous approach at each site.

Each unit is charged a management fee, which covers Mark, Hilary and Matt’s time, so that the cost of production does not omit family labour.

At the end of each year, the directors look at the balance sheet to see how it has grown.

Something Matt brought back from his travels to New Zealand with Positive Farmers in 2018 was an equity growth curve, which allows the family to assess how they are building value in the business.

All meetings between Mark, Hilary and Matt are treated as director’s meetings rather than family chats. 

Tony Evans, a consultant with Andersons, has worked with the family for many years and meets them quarterly to review progress.

“He’s been integral in our move from Devon and our business growth,” says Matt. 

People management and retention at PFL

Having a committed workforce to fulfil positions as opportunities arise is key to PFL’s business model.

“Seeing other people achieve good things is rewarding,” says Matt, who is passionate about developing employees.

People development approaches used across PFL include:

Investment in training PFL spend about £500/employee/year on training.

Off-farm experience The aim is to have each employee off-farm one day a month, visiting other farms, attending discussion groups or training.

Personality profiling This has been carried out across the business to help understand people’s motivation. Staff are salaried and not incentivised by bonuses.

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Social events The whole team gets together for socials and herd managers are given money for team breakfast meetings.

Inter-farm rivalry Herd managers get together with the directors to review KPIs. Looking at the numbers side-by-side naturally creates healthy competition.

Recruiting non-agricultural staff Two recruits have joined the PFL team with no agricultural experience. Matt says they needed good training, having never milked a cow or driven a tractor, but have brought enthusiasm and no “bad habits”.

Sharing experience/workload across blocks This has been valuable with the new recruits.

Taking them on in August meant the business was overstaffed at a quiet time of year, allowing them time to shadow others and learn the standard operating procedures on the autumn-calving farm before heading into spring-calving on their own unit.

Apprenticeships The idea of an apprenticeship scheme was brought to the business by  herd manager George Brown, a former Farmers Weekly Farmers Apprentice winner.

The plan is to recruit a trainee herd manager who will gain experience on one of PFL’s units before going on a sponsored 12-month sabbatical trip to New Zealand to gain experience on a leading dairy farm there.

To find out more about the business and keep up with its progress, visit the Pilkington Farms website or follow @mattpilks1 on Twitter.