The modern American farm is quite a bit different from what it was 100 years ago. These days, most of the farming in the US is done on huge, corporate-owned commercial farms with millions of acres of cropland and/or huge droves of livestock. This kind of farming is handled more like running a factory than what we traditionally imagine when we think of a farmer working the land.
That’s not to say that the traditional family farm no longer exists. Many families have been able to adapt and make a success of independent farming in this new reality, often by taking advantage of technology and supplementing their income with non-farming related work that doesn’t interfere with the growing season.
Whether your family farm is one of these successful examples, or perhaps you’ve been struggling for some time to make a success of independent farming, you may be considering selling the family farm in favor or a new opportunity or in hopes of retirement.
The following tips can help anyone prepare their small family farm for sale and make the transaction faster, easier, and more profitable than it would otherwise be.
Keep thorough, accurate records
Family-run businesses are often under-documented, and farms have been run notoriously informally due in part to the highly unpredictable nature of agriculture and the fact that many family farms are highly self-sufficient and thoroughly interconnected with the local community, resulting in a lot of bartering and unique transactions.
That all being said, if you hope to sell your farm for a profit, you’re going to need to herd those cats by pulling together sufficient documentation to convince an outsider that your farm is capable of supporting itself and making a profit.
In other words, a prospective buyer is going to be buying a business, so you need to display appropriate financial, legal, and business records they can trust.
Focus on profit
While most small, independent family farms focus on self-sufficiency and maintenance, just making sure the bills are paid and there’s gas in the tank, a farm that’s going to sell needs to make a profit.
In many cases, it’s difficult if not impossible for small farms to make a healthy profit based on farming alone. With very few exceptions, the cost of running a farm simply outweighs the price of food and other consumer products they produce. As a result, profitability usually comes from additional products or services that the farm can support beyond agriculture.
An example is the Pick-a-pumpkin Pumpkin Patch in Esperance, New York. The VanDerwerken family has owned and operated the farm since 1955 when it was a fully functioning dairy farm. Over the years, they transitioned to a pumpkin patch, growing pumpkins for a local grocer. Then, with a bumper crop in 1985, they started inviting the public to come in and pick their own pumpkins.
With the crowds came unexpected opportunities to give urban neighbors a taste of farm living. Today, the Pick-a-pumpkin Pumpkin Patch still grows thousands of pumpkins a year. But the majority of their income is generated by a host of fun experiences and special events occurring throughout the year that have made them a tourist attraction in the area.
Small farms can focus on profit creatively like the VanDerwerkens did, or by adjusting their farming activity to include more profitable crops. Adjustments to the supply chain to take advantage of the farm-to-table and “buy local” trends can also improve margins on farm products. Use of technology and application of the latest agricultural science can also increase yields and boost profitability.
Whatever methods are used, a farm that’s unable to show a profit is unlikely to sell successfully. So, if selling the farm is in your list of goals, now’s the time to make the necessary adjustments to ensure buyers can see profitability in their future.
Organize a team of advisors
As you get closer to the sale, it becomes important to bring in professionals who can assist with the intricacies of selling a farm. Unlike some other business sales, a farm uniquely combines the sale of a business, several different types of real estate, and assorted tangible and intangible assets.
To help coordinate a successful sale, it’s beneficial to bring in a business broker, accountant, lawyer, and real estate agent, all of whom are familiar with farm sales in the local area. These can provide invaluable assistance in preparing the farm for sale and handling the minutia of the negotiation and final transaction, taking a lot of that stress off your plate.
While it may be tempting to handle everything yourself in order to save money, this team of advisors almost always pays for itself through a higher sale price and smoother transaction.
Advise the new owner
One of the most valuable things you can do to both encourage the purchase and ensure your farm continues to succeed even after you leave, is to work closely with the new owner to advise them on how you’ve been able to successfully run the farm thus far.
From a practical standpoint, this depends on the buyer’s level of experience and whether or not they want the help. But most buyers will appreciate the opportunity to bounce ideas off of you or ask questions for a period of time after the sale. Your willingness to offer this level of help after the sale could make the difference to a buyer who’s on the fence about making the purchase due to a lack of confidence in themselves as a new owner.
Certainly, there are many other things you can do as the current owner of a family farm to prepare your business for sale. In many ways, the farm needs to be prepared like any other business to change ownership. But the real takeaway is the fact that preparation is necessary and that a successful sale is going to depend on treating the family farm like the family business that it is.