Top tips on how to make a farm partnership work

1st published 08/02/2022 in The Farming Independent

Michael Brady.

Agricultural Consultant and managing director at Brady Group: Agricultural Consultants & Land Agents. The Lodge, Lee Road, Cork.

It’s been said that Farm partnerships are an agricultural consultant’s dream; there is work in setting them up, counselling them and breaking them up.

In fact, the reality is very different, most agricultural consultants find dealing with farm partnerships arduous at the best of times. The best farm partnership agreements are gathering dust in a drawer as the partners are happily getting on with the running of the farm business. 

A Farm Partnership is where two or more farmers join resources to form one business and acquire various benefits. Farm Partnerships, are becoming more popular in Ireland with approximately 3,000 formally registered on the Department of Agriculture Food and the Marine Register of Farm Partnerships, a high proportion of these are family partnerships. Government has incentivised the formation of farm partnerships with various taxation incentives, double capital TAMS grants/schemes and a collaborative farming grant to cover setting up costs.

However, partnerships are not for the faint hearted, they can look perfect on paper but then not work at all in practice.

The following are some tips to consider when setting up a new farm partnership:

  1. Ask yourself why – know what you are looking for

This is the fundamental question to ask when entering a new farm partnership; what are the benefits of entering into the partnership for all partners? Increased net profit, working less and a better work life balance are common valid reasons to enter a farm partnership. Protecting farm subsidies, double TAMS grants and taking over the neighbour’s farm are not valid reasons for entering a farm partnership.  

  • Open communication – you will be sharing a bank account

Often when agricultural consultants receive a telephone call about a potential new farm partnership, the pro-active partner is solely focused on getting inside the gate of a new farm. When it is outlined that there will be sharing of bank accounts, Basic Payment Scheme applications and financial accounts, the conversation is quickly ended. Open conversation on goals and expectations, existing farm business performance and bank debt are key issues to discuss before pen is put to paper on a farm partnership agreement.   

  • Picture the breakup

It is not the easiest conversation to have with a new prospective partner but discussing the potential dissolution or breakup of the partnership at a future date is fundamental to having a strong partnership agreement.

If you have considered a future breakup of the partnership and its implications for all parties concerned it forms a basis for a strong business relationship. Remember all farm partnerships eventually end.

  • Understand the decision-making process (extended family)

Who will ultimately influence the decision-making process in a farm partnership? It may not be the partner named on the agreement. It could be a spouse or extended family or even professional advisors. This is a very important aspect of a successful partnership, most failures are as a result of poor decision-making processes.  

  • Make a plan

Make a farm business plan which includes physical and financial projections for the partnership. A realistic plan will show the benefits of the new farm partnership and enable better decision making. If you fail to plan you plan to fail.

  • Get a professional independent opinion

There are a lots of myths and ‘pub talk’ about the pros and cons of farm partnerships. Yes, it is very important to seek out other opinions on a proposed new partnership, but the advice of an independent professional who has experience of setting up, counselling and breaking up farm partnerships is invaluable at the commencement of the process.