Selling a farm business is a full-time job, but if you prepare well, your return on investment will soar beyond the sunset you’re hoping to ride off into. Waiting for the perfect timing can amplify your profits exponentially, but preparing to go to market entails more than just getting to the other side of an underperforming industry.
Maximising return on investment
You had to educate yourself before you entered the marketplace, and you must do so again when you leave it. You’ll need to mitigate the risks of a bad deal and avoid damaging a good one. One of the most important tasks in this area is getting to know the current market conditions. If your industry is staggering through a downswing, it’s best to wait for market recovery.
Fortunately, industry forecasters can prepare you for an unknown future. 60% of sub-Saharan Africa’s population is smallholder farmers, contributing 23% of the GDP. This attractive landscape doesn’t negate smaller swings in business value, through, so assess your niche before you sell.
There are currently declines in farm income that may reduce your business value in the short term. African economies are vastly disparate, so location is everything. If your nation is currently experiencing political upheaval, mistiming your resale could be a grave mistake.
Digitally native, tech-savvy consumers are dominating supply chains and consumer behaviours in Southern and Central Africa. If your business isn’t leveraging these technologies yet, investing in them prior to your sale could push your value up exponentially.
Preparing your paperwork and permissions
A sluggish resale can lead to abandonment, so it’s critical to prepare permissions in advance. You may need permission to subdivide land, build onto your property, or create new land developments. If your current crops are experiencing a downswing, you may decide to shift onto more lucrative terrain, and that might require additional trading permits.
Selling a farm isn’t like selling a home. To successfully conclude the deal, you’ll need copies of stewardship agreements and planning consents, both of which can be prepared in advance.
Choosing a middleman
Selling a large swatch of land has tax implications that can cost you significantly, particularly in the form of capital gains tax. Add inheritance tax, and your resale value quickly becomes a liability. An accountant will help you to leverage tax laws to your advantage, while a solicitor will handle land registration and covenants.
A broker with experience in agricultural business sales will have the marketing smarts and audience you need to fetch your highest price. A specialised broker will also advise you on the finer intricacies of selling your agricultural investment.
Becoming ready for viewings
The more attractive your land, the higher your resale value will climb. Making the right first impression needn’t entail full restorations, but adding a little fresh paint and trimming your verges will go a long way. While selling “as-is” is an option, it might come with a price drop. It’s generally more lucrative to fix properties and machinery prior to listing your business.
Creating a financial picture of your agribusiness
Buying a farm in Africa requires in-depth investigation into the potential of the land and its profit history. High water tables and rainfall data are equally influential on the potential of your land. The clearer the picture you create, the more confident your buyers will be.
Arable land still fetches the best prices, particularly in drought-prone regions like South Africa and Ethiopia. Reducing your business to numbers will seal up the cracks in your sale, but sometimes, paperwork isn’t enough. If your grid maps, soil analysis, and other numbers are currently being diminished by poor weather conditions, you may need to collect projections or even wait for the sky to burst.
The two most important agronomic factors are the size and quality of your plot. Profitability and production follow closely behind, with market dynamics taking fourth place. To conclude a profitable resale, you must achieve on all four fronts. That’s perfectly achievable with adequate preparation and the right professional guidance.
By Bruce Hakutizwi, Director of North America for BusinessesForSale.com, the world’s largest online marketplace for buying and selling small and medium size businesses.