As anyone who has set up their own farming business will be well aware, the ‘life’ of an agribusiness doesn’t follow a straight line from start-up to success. Agribusinesses, just like the market in general, go through a lifecycle from start-up, through to growth, maturity and transition.
Being aware of which stage of this lifecycle you’re in can help your business adapt to its limitations and expand on its growth possibilities.
So when you’re looking to grow your agribusiness, this cyclical nature needs to be taken into account in any attempt to understand how businesses change and develop.
Westpac Agribusiness has been monitoring and assisting farmers for many years, and has a unique outsiders grasp of the different phases an agribusiness goes through.
While we outline them to the right, it’s important that we work with you throughout these phases, to provide you with the right tools to help you grow to your full potential.
What are the phases of agribusiness?
Start-up Phase
In the Start-up Phase you may be thinking of:
• Going share milking
• Leasing a property.
The ‘start-up’ phase is probably the most challenging, yet in terms of external needs, the most simple.
You’ll be doing the bulk of the work yourself, so your banking needs are reasonably straightforward.
Natural Growth Phase
In the Natural Growth Phase you may be thinking about:
• Increasing your share milking job
• Joining a equity partnership
• Purchasing your first farm
• Developing your existing property.
Growth Phase
As you move into the Growth Phase, you may employ staff and it’s here that your banking needs start to grow with your business.
Now your bank starts to become more of a financial partner rather than a service provider, and can be a crucial resource for independent advice.
From here it depends on the farming operation and how it’s run, as to how long it stays in that Growth Phase.
However long this period, at some stage in an agribusiness’s lifecycle a crossroad must occur.
Crossroad Phase
This may occur when:
• The production and potential of your agribusiness is at a level where you can’t see any more potential growth
• You’re experiencing an industry downturn that affects your ability to achieve your goals within the timeframe you set for yourself.
This crossroad will be a naturally occurring stage of the agribusiness’s life, where you must decide to expand, restructure or invest in capital growth off-farm.
Handled properly this leads to further growth, and, in a steps and stairs type of fashion, you move through the growth and into what we call the Maturing Phase.
The Maturing Phase
This is a period of relative balance where your main banking needs tend to be looking after your well-earned capital, while maintaining sound debt servicing levels.
Finally, an agribusiness reaches the end of its cycle, and is poised to make the next step.
This can often include the possibility of a sale or handover to a successor.
It presents you with the opportunity to let go of the reins, and enjoy being free of the pressures of running a farming operation. Your banking becomes more personal in nature.
This too, can be a difficult time and needs to be well managed so that you end up financially stable during this final phase.
