Smart agriculture: What resilient farmers do differently

Falling milk prices have seen renewed discussion about the tough times ahead for those in the dairy sector, and as such it seems a timely opportunity to share some insights into how farmers can put themselves into the best possible position to overcome the challenges ahead.

Adaptability and resilience have become critical to successful agribusiness ventures and we see time and again that the most profitable and resilient businesses are the ones where the decision-making over a period of time has been of a high standard.

It’s important to respond with reassurance and agility in times of stress and our bankers are empowered to do what is right for customers; however it is obvious that there are some fundamental actions that separate those farmers who are always affected negatively and the ones next door who grow and prosper through all conditions.

There are five key things they do differently. They:

  • Have a clear strategy and execute on it quickly.
    They know the impacts of adding or taking away costs and have already budgeted both feed and cash so that they are in a position to fill shortages before they happen.
  • Know what the long term impact of short term decisions were.
    Decisions like drying off, keeping cows home from grazing, how many cows to milk, what you do with surpluses in good years, all have an impact and it’s important to know what it is for your business.
  • Involve their professionals in their process.
    They don’t try to solve problems all by themselves. This is important for your mental state as well as your business. Resilience is not staunchly dealing with things on your own.Your advisers (banker, farm adviser, accountant, fertiliser rep) are in the information market every day and the earlier we can discuss financial and farming pressures with clients and work through their action plan with them, the earlier we are able to consider what assistance we can provide. Don’t leave things until the last minute.
  • Have a farming structure that adapts and has some redundancy-flexibility in it to cope with, and potentially profit from, adverse events.
    If you don’t have a reliable irrigation, there is the possibility that you will face some sort of dry event, and in some cases on a regular basis. The best farmers embrace this fact and have systems in place to ensure that dry conditions are considered as part of the farming system.
  • Recognise that there are a lot of things they cannot control and focus on controlling the ones they can.
    You can’t control the weather or stock-milk prices or the exchange rate or floating interest rates. But you can control your farming system, what pasture species you have, what your stocking rate is at various times of the year.

Act now

We found that while support packages for things like extreme weather and other events are important to assist those who are struggling, using them once these events have been announced is really leaving it too late.

It has become clear that building adaptability and resilience is the key differentiator in hard times and some new skills need to be learned and applied where unforeseen pricing and weather events can create stress for farm owners and their families. Farming is tough enough already. If you’re under stress mentally or financially then it’s time to act, because there is probably a better way.

The key is acting before the event takes place, having plans and budget in place and keeping your advisers in the loop. And remember above all, you’re not on your own.

John Janssen is BNZ’s Head of Agribusiness.

When the hammer falls: My journey to homeownership

BNZ Community member @CatherineV bought her first home at auction and reflects on the process, the properties, and the panic before the final hammer fell.

My husband and I are both savers, so when we got married in 2014 we were both in a pretty good situation with our savings. Both of us have put aside a little bit from each of our paychecks since we started working just over a decade ago, which has paid for all sorts of stuff over the years. Once we decided to test the waters of the property market it meant we had our deposit ready to go.

Price ranges and properties

Getting started was all about the detail. We had to speak to the bank to get an idea of what we could afford and we got some really good advice from them and fromBNZ Community blog posts on how to decide how much to borrow.

After a short time looking in Auckland and not finding what we wanted in our price range we had to consider other options. This meant considering different styles of properties like apartments rather than houses and extending our search geographically. It seems to be a common pain point for young buyers. After a while you tend to get rather tired of people suggesting you look further out when you’re already doing so and it’s a pretty personal decision as to where you live.

Open homes and spreadsheets and building reports, oh my!

It got quite intense. I’m now super familiar with the Trade Me Property app and could probably scan for new properties in my sleep. Our weekends consisted of going to 6+ open homes on a Saturday then back to the ones we liked on a Sunday. We’d often take Mum and/or Dad to get a second opinion. The whole process is time consuming and emotionally draining. I’d like somewhere and my husband wouldn’t.

When we got back from open homes we’d do a summary of them all and grade the ones we both liked. We had a spreadsheet where we would mark components of the property out of 10 and give the place an overall score. We’d mark things like location, size, street noise, kitchen and other benefits. It was really useful to geta bit more of an objective view, and is a great tip from this blog on what to look out for at open homes.

Finding ‘The One’

When we found a place we both liked it was time to get a building report. This was where it got painful. We were looking at apartments so had to be really careful. Not once but twice I had my heart set on a place only to get a building report and discover it was leaky. Depending on your builder and whether you get a written or verbal report, you’re looking at $300-600 each time. It’s a cost but one that we had to absorb. It’s nothing compared to the potential cost of buying a leaky property that would require a major investment on top of our purchase price.

Before going to an auction we needed to go to the bank to get pre-approval. When you bid it’s unconditional so you need to have all your ducks in a row. This blog gives a rundown of what you need to think about beforehand.

The big day

Auction day was absolutely terrifying. I’ve never been so scared in my entire life. From the minute I woke up until the day after the auction I was in a state of panic. My husband actually suggested I don’t go into the auction room as I looked so petrified but I made it in the end.

One of the bits of advice we were given was to have a pinch price, a buy price and a top price. I’d suggest also having a ‘top top’ price for the day. Including these prices on the spreadsheet helps. We ended up winning, on our ‘top top’ price. After that you’re taken away to arrange to pay the 10% deposit and sign all the paperwork.

Then it’s all over. After the hammer falls on the biggest financial investment many of us will ever make, there can be a sense of panic.  I felt it but there was also celebration at feeling like we’d reached a milestone. Corks may have popped. Good luck to any of you on this journey at the moment.

Crowdfunding cash: 5 ways to fund your start-up business

So, you’ve had the idea, you’ve sorted the business plan, and now you need some cold hard cash to kick start your plans into reality. But where does one turn to find start up capital? You can use traditional ways like borrowing from a bank (like us) but there are plenty of options for sourcing revenue that can complement traditional lending, to help start and grow your business.

Here are 5 ideas for funding your start-up that could ease the burden of debt and kick start your business.

1. Angel investors

An angel investor is simply a high-net-worth individual (often a successful entrepreneur) looking to invest funds in an innovative start up business they can contribute their skills to. Angel investors tend to look to invest in high-growth businesses that are focused on significant global opportunities. Most angel investors typically pick investment opportunities in their fields of expertise so they can apply their experience to helping the business succeed.

They usually look for investment opportunities at earlier stages in the life of a business than other types of investors or lenders. If they can see the potential of an idea, they’re more likely to invest in a young start up business they can nurture.

In return for capital investment and their expertise, angel investors usually take an equity share in the business and expect a healthy short-term return on their investment.

The ICE Angels are a great place to start. Here is an introduction to how the process works and how to get in touch with them.

2. Crowdfunding

Crowdfunding is the newest trend in raising capital and is most appropriate for higher-risk creative and artistic projects that can be harder to fund through traditional providers.

Crowdfunding websites often offer rewards, discounts and special privileges (such as receiving a pre-release or beta version of a product) in return for small investments.

Each crowdfunding website operates to different rules, so make sure you research your options carefully before choosing one as a platform to seek investment.

3. Grants and financial incentives

There are a wide variety of grants and incentives on-hand to give Kiwi start-ups a welcome boost. Even some free advice and contacts could be all you need to take your business to the next level.

Here are some options to explore:

Callaghan Innovation
Callaghan Innovation is a stand-alone Crown entity that works with businesses of all shapes and sizes to innovate and grow.

Callaghan Innovation administers more than $140 million a year in business research and development (R&D) funding through three grants programmes:

• R&D Growth Grants for businesses experienced in research and development in New Zealand, to support an increase in investment.
• R&D Project Grants for smaller research and development programmes and start-ups and those new to R&D.
• R&D Student Grants to support students to work in a commercial research and development environment.

Find out more about grants offered by Callaghan Innovation and how to apply.

New Zealand Trade and Enterprise (NZTE) Capability Development Vouchers
Your business could qualify for vouchers to help pay for services such as workshops, courses and coaching that build your skills and capability.

Find out if your business qualifies.

Regional Business Partners
There are 14 Regional Business Partners in every corner of the country to help local businesses grow and innovate, by providing expert advice and even access to funding. Their services are free of charge and you get in touch with them at anytime you need advice.

Find out how to contact your local Regional Business Partner.

4. Borrowing from family and friends
Getting a cash injection from a family member or friend can be a good option provided you are aware of the risks. They’re likely to trust in your judgement and be more accepting of your business case than traditional lenders and investors.

Introducing finances into any relationship can strain ties and damage trust if things don’t work out as planned. Always make sure you document the arrangement with a signed contract that sets out the terms and conditions in writing. If you are dealing with a significant amount of money, it’s a good idea to consult a lawyer to help you draft the contract.

5. Offering sweat equity instead of cash
Cash doesn’t always solve the problem – offering sweat equity is a good way to boost your capability and grow your expertise. Sweat equity involves contributing to a business or project in the form of effort – instead of financial equity, in the form of capital. In a partnership, some partners may contribute only capital and others only sweat equity to the business. In this case, a person is able to supply their skills or experience (instead of capital) in exchange for a share of the business or future payment.

Here are some examples where offering sweat equity could work:

• A carpenter being offering a stake in a carpentry business in return for fitting out a premises or workshop.
• An artist supplying their works as part of a shared space or for future payment.
• A group of people pooling their skills and efforts to launch a cooperative – such as a grocer or retail space.

Once you’ve worked out the best way to fund your start up business, we have small business specialists available to help you manage that money to grow your business. To talk to us about any of the angel investors and business incubators we have teamed up with, call us on 0800 269 763.