Agriculture equipment is essential for every farmer to cultivate crops because,
without agricultural machinery, farmers cannot perform and deliver agriculture products to end customers.
But even if agriculture equipment is mandatory on every farm,
the smart business decision to buy or rent is what separates profitable farming from survival mode.
The real cost of always buying new agriculture equipment on the farmers’ profit
Every agriculture year is different from the previous one, and therefore farmers take a different approach, including various tasks depending on the weather conditions and other factors.
To do those tasks, farmers usually believe additional agriculture equipment is necessary and think they need to buy it, but this is not always required.
Buying as the only option was the case for our parents and grandparents. But nowadays, farmers have access to info from all over the world via the internet.
The farmers’ communities on social media are a great place to share knowledge and experience and find innovative and straightforward solutions to problems without paying a fortune for equipment to be used only once. It is what you are doing right now by reading this blog!
The alternative to buying farm equipment?
Buying a piece of farm equipment will transform it into a fixed cost. Is it the best decision? Well, it is a business decision that every farm business owner should take based on the farm’s growth strategy.
For instance, if you have high profits during that year and expect high earnings during the next years, it makes sense to use asset depreciation to optimize taxation.
Or, maybe you need to become more profitable in the short term, and you choose to use variable costs. It means that you pay for what you use, like when you rent a car during the holiday.
You have the advantage of using it without all the responsibilities of repair, maintenance, taxation, Etc.
For instance, when you rent a harvester, you take advantage of utilizing it and boost your performance without owning it. This strategy can continuously change depending on your current situation and goals.
There is agriculture equipment that is intensively used or unique to your needs. Therefore, you should analyze for every single case which best matches your needs.
What is the best fit for your neighbor may not be the best option for you, simply because your farm’s context is different from your neighbor’s farm.
Other industries are doing this successfully
Don’t you believe me? I want to share a surprising fact: did you know that many buildings where Ibis hotels operate don’t belong to the company? The buildings belong to an asset management company whose business is in renting properties.
Ibis pays a variable rent depending on the number of clients, increasing their profit. Their partner also wins by associating themselves with the Ibis brand to maximize profit.
How Ibis does that? Ibis does in-depth data analysis and prognosis with the number of potential customers who may need to use hotel services in a particular area.
Therefore, Ibis decides if a location is a good fit for them to settle on. For Ibis and the building owners, it is a win-win situation.
The solution I have for your farm
Your farm can also benefit by using business methods to evaluate if buy or rent is the best decision to have a profitable farming business.
In the end, the bottom line is telling you if you have a profitable farming business or not. Smart business decisions are based on business analysis.
How do I know? I did this kind of research for myself. It was such a profit generator that I want to share it with you. It will help you improve how you make decisions and start taking actions that are financially profitable for your farm.
The document I used to do this examination is available for you here.
This simple yet powerful document will help you know exactly how context buying equipment is the right decision.
You will know right from the beginning, what are the consequences of your decision because these are the leadership decisions that will influence your farm’s future financial performance.
Conclusion
Let’s not confuse, farming is a business, and if you want to make a profit from your farm, you should
use business tools to analyze which investment brings money or destroy your farm’s wealth.
Therefore using business tools in your farm is truly necessary if you want to have a business and not an expensive hobby. I highly recommend you do this kind of analysis before buying any equipment on your farm.
Or you can do things as you did before reading this blog, and you will get the same results over and over again. It is your choice.
