Why most farm owners are wealthy on paper but not rich in their bank accounts…

When I ask you to picture the wealthiest 1% in the world, who comes to mind?

Jeff Bezos?

Gina Rinehart?

Bill Gates?

What if I told you that YOU are part of that elite group? 😳

Even if it sounds completely insane, it may very likely be true!

Many of the farm owners we know fit the financial criteria to be part of the top 1%. (We’ll tell you the exact criteria in just a minute.)

But if so many farm owners are in the top 1% — or even the top 10% or 20% — why don’t they feel like it?

Why do they spend their days stressed about money and losing the family farm…

Working themselves to the bone, 7 days a week…

Yet still have barely any money in their bank accounts?

There’s this disconnect happening because most (or all) of your wealth is likely in non-cash assets — land and equipment, mainly — rather than your bank account.

Even if you own $100 million in land and you’re running the farming business on it, if your business isn’t turning a profit or paying you a salary, you might not have a cent in your bank account.

Most farmers are asset rich (which makes them wealthy on paper) but cash poor. So it doesn’t feel like money at all.

I don’t know about you…

But if you’re part of the wealthiest 1% of the world, I say you deserve to feel and live like it!

You should ENJOY your money and all the fun things that come with it…

Feel calm and at ease, knowing you’ve got a solid financial net beneath you…

And know that you’re building a legacy of dependable wealth for future generations.

Whatever your cash situation right now, I guarantee there’s a way to leverage your assets better to live a richer life.

Today’s blog post will explore the 3 options in front of you to make the most of your wealth (whatever level you’re at), so you can start living like the rich business owner you are on paper.

Are you part of the top 1%?

According to The Conversation, an individual net worth of $1,295,825 AUD makes you among the world’s 1% richest people. If it’s you and your partner at home, that’s a combined household net worth of $2,591,650.

(Note: That amount is wealth, not income).

Net worth is the total of every asset to your name — bank balances, property ownership, farming equipment, share portfolio, superannuation balances, etc. — minus any debts.

Basically, if you sold everything and levelled any debt to your name tomorrow, how much money would you have? ← That’s your net worth.

According to ABARES statistics the average farm owners net worth in Australia is in the order of $5.8 million, mainly in land, livestock and plant and equipment.

Are you in that bracket?

If so — you’re in the top 1% wealthiest people on the planet. (May I get you some caviar and champagne to celebrate?)

Even if you’re not in the top 1%, I bet you’re hovering somewhere above the wealthiest 20% of all people on the planet. That’s such a powerful place to be!

So what should you do with that wealth, in order to make the most of it?

The 3 wealth benchmarks you should be seeing on your farm

If you’re in the top 20% (and I’m willing to bet you are), we have certain benchmarks we like to see our farm owners hitting.

These are signs of a healthy business AND a healthy personal life. (Because you deserve to live a rich life for all the hard work you put in day in, day out!)

Every farm business is different so these benchmarks aren’t exact. But they’ll give you a rough idea of where you want to be tracking.

If you’re NOT hitting these benchmarks, don’t worry. We’ll give you 3 options in a minute for how to improve your situation.

Benchmark #1: Your business should be returning to you in profit (after paying yourself a commercial wage – see Benchmark #2) at least what you could lease your land out for (currently around 3-5% of asset value).

The market lease rates in Australia at the moment are around 3-5% of land value — so that’s what you could make if you stopped farming and leased your land to someone else. Other than being paid the lease payment, there is no risk to this strategy.

To determine if you’re hitting this benchmark, you need to calculate your Return on Assets Managed (ROAM). This is a financial ratio that tells you how your profitability compares to the assets used to generate that profit.

Here how to calculate ROAM:

= Net Profit
Asset Value

Note: Net Profit is your income, minus all your expenses (excl. tax, leases and finance costs). The expenses include allocating a proper wage for all owners and family working in the business (see Benchmark #2).

For example, if you had a Net Profit of $100K last year and your Asset Value is $2M…

= $100K = 5%
$2M ROAM

If you’re not currently seeing 3-5% return on assets managed (ROAM), you might as well be sitting on a beach somewhere and leasing out your land — you’d make the same amount of money and be taking on less risk!

(If you want to learn more about the healthy financial farm benchmarks like ROAM, click here to download our free cheat sheet!)

Benchmark #2: Pay yourself (the principal owner) a salary of $115K and full-time family workers $70K.

Too many farmers don’t pay themselves a proper wage. You’re highly skilled and should be paid accordingly!

$115K (incl. super and on costs) is the bare minimum for what you deserve as the farm owner. Often our farm owners enjoy salaries much higher…but $115K is the minimum you should be seeing on a healthy farm business. If you had to pay someone full time to manage your farming business and run it well, this is at least what you would have to pay.

In a similar vein, full-time family working in the farming business deserve to make at least a $70K salary (incl. super and on costs), to compensate them for all their hard work.

A healthy farm business can easily work salaries like this into their operating expenses.

Benchmark #3: Keep your Equity Percentage around 80%.

Equity Percentage measures the value of ownership in your farm (land, plant and livestock) and is basically the breakdown of assets YOU own, versus how many are owned by the bank or other lenders. A healthy farm business owns the majority of those assets — around 80% is ideal.

Here’s how to calculate Equity Percentage:

= Market Value of Your Farm — Farm Debts
Market Value of Your Farm

For example, if your farm is worth $1M, you owe $200K on your mortgage and have $100K in other debts…

= $1M — ($200K + $100K) = $1M — ($300K) = $700K = 70%
$1M $1M $1M Equity Percentage

(If you want to learn more about the healthy financial farm benchmarks like Equity Percentage, click here to download our free cheat sheet!)

It’s okay if your Equity Percentage is lower than 80% from time to time, as long as the business profitability can sustain it and you have a clear plan to return it to a higher level. It shouldn’t be way higher than 80% though, as this has the potential to create a lazy balance sheet and means you’re missing out on other income-producing activities.

As the chart above shows, most farm owners’ equity levels have increased dramatically recently because land prices have gone up. If you aren’t taking advantage of this (and the low interest rates right now) to build wealth over time, you may be missing a big opportunity.

Maybe you’re hitting all three of those benchmarks already. If so, you can click out of this blog post now because you’re already killing it! Keep up the good work, mate. 😉

But more likely, you’re lagging behind on one, two, or all three of those benchmarks. That’s okay, and most farm owners are in the same boat.

The next step is to explore your options, whatever your current financial position. You’ve got this big asset base and you’re highly employable and skillful…don’t accept a situation where you’re not living like a wealthy person!

3 options to ENJOY your high level of wealth

1. Sell everything (if you love farming don’t do this…)

Let’s start with the most controversial option, shall we? 😏

You’ve always got the choice to make a clean break: sell all your assets, pay off your debts, and enjoy the money left over.

This may be the best option if you don’t have a strong business, don’t have a passion for farming, aren’t interested in learning about business, and/or you want to leave the industry.

(If you don’t have a strong business but DO have a passion for farming, reach out to us at Farm Owners Academy — we can help!)

Most of our farm owners want to stay in farming. But don’t discount this option without considering it first! It’s powerful to explore all the opportunities in front of you.

This option might be for you if:

You’ve lost your passion for farming and want a clean break from the industry
You don’t have a strong farm business and don’t want to work on it
You’re passionate about something else (work or personal) and want a big lump sum of money to fuel that passion
Your children don’t want to stay in farming and would rather have money than inherit the farm ← this is why communication in succession planning is so important!

2. Lease your farm

Another option if you’re not passionate about farming is to lease your farm. This is a great choice if you’d like to do something different but you don’t want to sell the farm and lose it entirely.

Like we said above, the current market lease rates in Australia are in the order of 3-5% of land values — which means if you leased out your land to someone else, they’d pay you 3-5% of the value of those assets to do so.

So if you’re not currently making 3-5% ROAM from your farm, you may want to seriously consider this option because you’d probably make more money NOT working on the farm than you do working now!

Farm Owners Academy members Tim and Cheryl are doing a version of this and it’s working out incredibly well for them — click here to read their story.

Seriously, it’s up to you:

You can get up at 4am and slog all day in a roasting-hot paddock for 16 hours…or you can sleep in until 10am, put your sunscreen on, and lounge on the beach until dinnertime…and at the end of the day, make the same amount of money.

This option might be for you if:

You don’t want to work in farming day-to-day
You’re not ready to sell the farm
You’re currently making less than 3-5% ROAM and are not committed to improving your business performance
Your kids want to take over the farm someday but you don’t want to work it now

3. Run your farm business better

Most of the time, it’s not lack of wealth that’s holding our farmers back; it’s lack of education about how to USE that wealth.

If you’re not hitting the benchmarks above, don’t want to sell your farm, and still want to work in farming, your best option is to learn how to make your business more profitable.

…And that starts with an education in finance — the language of business. Once you understand how money truly works, you’ll be able to make the most of the assets you have to generate as much profit as possible.

That’s exactly what happened when Farm Owners Academy member David got serious about finance and business. He had his most profitable year on the farm AND worked 50% less — all because he knew how to leverage his assets in the smartest, richest way possible. Click here to read David’s story.

This option might be for you if:

You love farming and want to stay in the industry
You want to work on the farming business every day as your job (note: we said working ON the business, not IN the business; they’re very different things!)
You believe in the potential of your farm and of you as the farm leader — and you know with the right education, you could do better

So there you have it — 3 great options for high net-worth farm owners who don’t feel very rich right now:

Sell everything (and enjoy the money)
Lease your farm (and enjoy the money)
Transform your farm into a profitable business (and enjoy the money)

There’s no right answer, only what’s right for YOU.

So take some time to think about what you most want out of your farm — both today and in the future — and explore all your options to make the best choice for you and your family.

As always, we’re here to help! If this blog post piqued your interest and you want to learn more about making the most of your farm, let’s have a chat. Just send us an email at [email protected] and we’ll get it sorted.

The Ultimate Farm Enterprise Profit Cheat Sheet: 10 Financial Targets for Top Producers

6 Steps to Take You from Family Farm to Well-Run Business

David Had His Most Profitable Year…While Working 50% Less. Here’s How He Did It.

The ONE thing that helped Greg 4x his turnover and 3x his profits

Sometimes the smallest things in business produce the biggest results.

Quick history lesson:

Back in 2013, Farm Owners Academy co-founder Greg owned a vet business that was turning over $750K per year, $150K of which was profit.

Not bad, right?

But to make that money, he had to do EVERYTHING in the business himself.

He was working insane hours, 7 days a week — which didn’t leave much time or energy for the things he loved, including his three kids and consulting to farmers.

Sound familiar?

Greg wanted something different for his business and his life. So he joined a mastermind with a successful business coach to elevate his results.

And three years later…

After applying what he learned…

Greg grew his business to $3million turnover and $400K profit per year.

Now, that kind of financial transformation is pretty amazing. But what’s even more amazing?

He achieved those results without being involved in the day-to-day business. He did the hiring and firing, but basically, the business ran without him.

(That’s when Greg co-founded Farm Owners Academy with his business coach! Once he saw how powerful these business principles were, he couldn’t wait to share them with the farming community he devoted years to consulting.)

Here’s the important part:

Greg’s financial transformation — plus many of the transformations from our most successful clients — ultimately comes down to just one thing.

Yep…just one!

This thing is the biggest reason Farm Owner Academy Alumni members (the ones who complete the Platinum Mastermind Program ) get 4.6% higher Return on Assets Managed than the average farmer and have way more fun while they do it. (Given a $3 Million asset value, that’s an average of $108,000 more every single year, compared to the ABARES averages).

Want to know what that thing is so you can use it to grow your farming business?

Keep reading. 😉 We’ll share the secret strategy, along with 3 tips to help you apply it and start seeing results for yourself.

The ONE thing the most successful farm owners all have in common is…

They realise to get the things that successful farmer owners HAVE, first you need to BE (or think) the way successful farm owners think and then DO the things that successful farmer owners DO. This is the Be – Do – Have model.

At the top is what you want to HAVE — these are your results. (In Greg’s case, it was a $3 million turnover business that ran without him day-to-day.)

Beneath that are things you have to DO to achieve those results. These are your actions and habits. (Greg had to hire a coach, train new staff, redesign the business to run without him, etc.)

Beneath that is who you have to BE in order to carry out those actions. (Greg had to become a strategic, forward-thinking, and confident business owner in order to take the steps to grow his business. He couldn’t do it as a vet who was needed to do all the work himself and was afraid to let go of control).

And underneath all three of those levels is something very, very important:

The right MINDSET.

Your mindset is a set of beliefs that shape how you think, feel, and behave.

And without the right mindset, you’ll never become the person who takes the actions that lead to the results you want.

The problem is most people have it the wrong way around…

They think that if they HAVE what the successful farm owner has, then they will DO what the successful farm owner does…and then they can BE the person the successful farm owner is.

So they go spend money on things that don’t really matter, they take little action, and their thinking remains the same tomorrow as it is today….AND….nothing changes.

After coaching hundreds of farm owners, 95% of our clients say the biggest shift they made that led to their success was a shift in their mindset…95%!

And the sad part is, most people think working on their mindset is a load of fluff.

Have you ever thought that mindset stuff was a bit fluffy? We did when we first started out.

But the truth is, the right mindset lies underneath everything else. Ask any successful business owner and we guarantee they’ll have done some mindset work in the past.

The good news is that working on your mindset costs absolutely nothing. So it’s okay if you’re skeptical. It doesn’t have to cost you anything to try this out and see if it works.

Here are 3 simple but significant mindset shifts (and how to shift them) to become the world-class farmer you need to be to create the business and life of your dreams.

Mindset shift #1: Teenager to toddler mentality

I bet you’ve either raised a teenager or spent time around a teenager. So tell me…

Can you teach a teenager anything new?

No.

Do teenagers think they already know everything?

Yep.

Teens have a closed mindset that blocks them from learning new things. Unfortunately, many farmers also think like this.

They think they already know everything about everything and there’s nothing new they can possibly learn. And this blocks the opportunity to discover new habits, tactics, and strategies to create a high-performing business.

To grow as a business owner, the first thing we need to drop is our ego.

Because you may know a whole lot about being a technical operator on the farm. But you probably don’t know everything about…

increasing profits
improving margins
creating a business model that delivers predictable results
developing systems and processes that give you more time

…and all the other elements of running a highly profitable farm business.

To be an open-minded business owner, you need to lose the “I already know that” teenage mindset and adopt a curious “what can I learn here?” toddler mindset.

Toddlers look at the world like everything is new. They’re constantly learning, watching others around them, and trying out different things to find what works best.

How to shift this mindset:

The next time you want to say, “I already know that” or “that won’t work for me,” say this instead:

“That’s interesting.”

You may not agree with everything you hear. But get out of the habit of discounting new or different information right away.

When you say “that’s interesting,” you can take a moment to consider how it might work for you…rather than simply assuming it won’t.

Top farm owners and successful business people always stay open to learning new things. If you can, too, you’ll take the first step in developing a winning mindset.

Mindset shift #2: “Failure” to “Feedback”

In sport, you’ve got the winning team and losing team, right?

And if you feel like you’re never winning (ex: if you’re always struggling to generate profits on the farm) it probably feels like you’re always on the losing side, like you’re failing.

But the way we see it, there is no losing. You’re either on the winning team or the LEARNING team.

Failure doesn’t actually exist. There’s just feedback.

If you try something and it doesn’t work out the way you expect, guess what? You just learned what doesn’t work…and that’s really helpful feedback! It gets you one step closer to what does work for your farm.

Look, succeeding in business involves trying new things and taking risks. And that inevitably means mistakes.

No business owner has a straight journey from win to win to win. There are always missteps along the way.

To be a profitable farm owner, you have to accept that mistakes will happen. But they’re not the end of the world, they’re just a step on your bigger journey.

How to shift this mindset:

The next time you make a mistake, remind yourself that it’s NOT a failure. It’s just a lesson.

As long as you remain open-minded (mindset shift #1) and keep participating…

If you look for feedback where you’re going wrong…

And if you apply that feedback to adjust your strategy and keep moving forward…

…It’s impossible to fail, in our experience. You’ll always find a way to win eventually.

Just think, “Okay, so now I know what doesn’t work. That’s great feedback.” And move on!

Mindset shift #3: Blame to ownership

After a bad season, most farmers will say things like…

“The bloody bank raked me over the coals.”

“My employee did a crap job and cost me a fortune.”

“The drought ruined my entire year.”

It’s really tempting to blame something or somebody else for your results, right? But that won’t help you grow a profitable farming business.

Because if it’s always somebody else’s fault, you’ll always be a victim without any control.

A stronger mindset is to take responsibility for the results on your farm. All of them.

And instead of blaming others, look for ways YOU can improve the situation:

“I could have done better negotiating my rates with the bank. I’ll learn more about negotiation and have another conversation with them.”

“I didn’t train my employee well enough. I’ll create some systems and processes to make it easier for them to do the job right in the future.”

“I chose to farm in this area and I know droughts happen. I need a better plan so I can still make profits even if the weather’s crap.”

Can you feel the difference between blaming and taking ownership?

Blaming feels weak, right? Whereas taking ownership feels strong and powerful.

How to shift this mindset:

You need to start playing “above the line”…

Top farm owners take ownership, accountability, and responsibility for every outcome in their farm business. They act as if everything is within their control.

So they’re always asking, “how can I improve this? What are the SOLUTIONS I can create?”

It’s a creative, problem-solving mindset. And when you use it, you’ll continually find ways to improve your results.

Whereas struggling farmers often blame someone or something else, make excuses, and deny any role in the problem. That makes them powerless to fix the situation and they keep repeating the same patterns and getting the same results.

If you want to step up and be a profitable farm owner, you need to start playing above the line, in all situations. And it starts with a mindset of taking ownership.

In our experience, improving your mindset is the #1 most important thing you can do to improve results on your farm.

The right mindset fuels the right beliefs and the right actions to get the results you want.

And you can start right here, right now, by making these three powerful mindset shifts:

Adopt an open-minded toddler mentality
Don’t fear mistakes and see failure as feedback
Take ownership of everything on your farm

Your mindset won’t change overnight. But little by little, you’ll notice that you start to think differently. And when you do, it will have an incredible effect on your actions and results.

What’s coming next…

We’ll be sending lots of free education your way over the next few weeks.

Have a toddler mentality with this stuff! Keep an open mind and see how it can work for you, rather than automatically saying, “I already know it all.”

The information we’ll be sharing has proven to work for our farmers (remember, they’re making a 4.6% higher ROAM every year) so you’re bound to pick up some powerful tips for your farm business.

We’ll send these lessons straight to your inbox, so click here to sign up for free Farm Owners Academy email updates.

Mindfulness and Its Place in Business Leadership

How to Deal with Fear of Failure

Hear More about Farm Owners Academy Co-founder Greg Johnsson’s Success Story

The 4 biggest tax mistakes that cost farmers thousands

Ahh, that blissful feeling of finishing your year-end financials.

You’ve totaled the bank balances.

Listed your income and expenses.

Painstakingly answered the 101 questions from your accountant.

And even though you’re breathing a sigh of relief because you’re finished for the year…

…You’re also probably wondering if you could have:

Saved more tax
Reduced your expenses
Made more money

If you’re like most farmers, the answers are most likely (unfortunately): yes, yes, and YES.

The truth is, there are a few common finance mistakes that cost farmers a heap of money every year at tax time. 4 of them, actually.

But there’s good news…

These 4 mistakes are really simple to fix, once you know what they are.

You don’t need to be a finance expert to understand the solutions.

And they’re easy…many can be solved in less than an hour. (One of them actually takes no time at all to do.)

So that next year, you’ll submit your taxes feeling completely confident that you’ve made and kept as much money as you possibly could.

Keep reading to learn the 4 year-end financial mistakes most farm owners make — and what to do instead…

Mistake #1: Buy a heap of stuff at the end of the year (because the tax man told you to)

This is probably the most common year-end tax mistake…and almost all farm owners tell us they’ve done it.

At the end of the year, many accountants suggest buying an expensive piece of machinery to reduce your profits on paper and save some tax.

You probably have a wish list of things you want on the farm, right? So this is a no-brainer. You buy a new harvester or a shed or a brand new ute (or maybe all 3) and think you’re making a good financial decision.

The problem is, this ends up COSTING you money, not saving it.

Sure, it might save you a bit of tax this year. But in the long run, it’s like spending $1 to make $0.30.

Here’s why:

Let’s say you bought your current harvester 8 years ago and it cost $200,000. It still works great and your plan is to sell it in 2 years, after 10 years of use.

But then your accountant tells you to buy something to save some tax. And there’s a good trade-in deal for your harvester this year. So you figure you may as well trade it in and get a new one.

But there’s a big hidden cost…

You just cut 2 years off the use of your harvester! So instead of paying $200,000 for 10 years of use (essentially a cost of $20,000 per year), you paid $200,000 and only got 8 years of use out of it ($25,000 per year).

You effectively just cost yourself $50,000 by replacing it 2 years before you needed to. (And it definitely didn’t save you $50,000 in tax.)

See? In the long run, this strategy can cost you a whole lot more than it saves.

Profitable farmer solution:

This one’s simple: Only buy new equipment when you truly need it.

Bringing forward expenses can be a good way to assist with tax planning but it must be done with careful consideration of the follow-on effects to the profitability of the business.

The most profitable farmers have a well-documented plan for equipment replacement — and they only deviate from that plan where there is a clear financial advantage to bringing forward investment in that equipment.

Remember: the more profitable your business, the more tax you pay. Be careful about focusing on short-term tax minimisation at the expense of long-term business profitability.

It’s often better to make more profit in the long run and pay a little more tax today than make expensive purchases before you need to.

Mistake #2: Accept your current rates

What’s one of the best ways to increase your profits?

Reduce your costs.

And one of the easiest and fastest ways to reduce your costs next year is by reducing your interest rates from your bank, fees from your selling agents, etc.

Most farm owners accept the interest rates given to them as gospel rather than seeking to reduce them.

But the truth is, your lender can almost always offer you a better rate…if you’re willing to ask for it.

Lenders want to make as much money off their loans as possible. So it’s in their interest to give you the highest rate that you’ll accept.

Read that again: Your lenders are currently offering you the highest rate they think you’ll accept.

What does that mean for you? There’s nearly always room to negotiate your rate down. Lenders would rather make slightly less off your loan than lose you entirely.

But lenders won’t just give you a lower rate. You need to ASK for it.

Profitable farmer solution:

Have conversations with each of your lenders to see if they can offer you better terms. Explain your need as a business owner to reduce your costs and ask them what they can do to improve your rates to keep you as a customer.

Here’s a tip if you want to negotiate your bank rates…

Speak to a lending broker who’s independent of your bank. They’ll share all the deals available in your position so you know what else is out there. (It’s often better than the terms you’re currently getting from your bank.)

Then, present those better offers to your bank manager…and ask if they can match them.

It doesn’t cost you anything to shop around and negotiate. But it could save you a whole heap of money next year at tax time.

Mistake #3: Store your money in FMDs

Many farmers put loads of money into FMDs (Farm Management Deposits)…and it’s one of the biggest mistakes you can make.

An FMD is a holding account where you can store your income and defer paying tax on it to a future date.

And FMDs can be useful…

Especially if you farm in a risky area where your income is quite variable. In the good years, you can essentially store money in your FMD and then dip into that pot to get you through future, poorer years.

…But you always end up paying the original amount of tax eventually. It’s just spread out over years instead of all at once.

Using FMDs isn’t a tax minimisation strategy…it’s a tax delay strategy. You’ll save some money today but create a future tax obligation for yourself.

And here’s why it’s such a costly mistake (if you’re not in a high-risk area or you have your account maxed out for extended periods):

The money in an FMD hardly earns any interest (often less than inflation). It just sits there, like keeping a pile of cash under your bed.

…When that same money — if used differently — could be working for you and making you even more money.

Profitable farmer solution:

Unless you live in a high-risk area, you’re often better off paying the tax now and investing the remaining profits to grow your wealth.

There are so many ways to make your money work for you rather than have it sit in an FMD doing nothing.

You could invest it in the share market
You could buy the farm next door or an investment property
You could scale your business by hiring help or working with a coach (Farm Owners Academy can help you there!)

Those are all much smarter uses of your money because you’ll make it work for you, instead of sitting there earning minimal interest in a FMD.

Let’s look at an example:

Say your average tax rate is 30%.

If you have an average of $500,000 sitting in FMDs for 5 years earning you 0.45% interest, it’ll be worth $507,925 in 5 years time. At that stage you withdraw the money and pay $150,000 in income tax. This leaves you with $357,925 after tax in 5 years.

But if you took that same $500,000, paid the $150,000 tax immediately, leaving you with $350,000 and put it into an investment that earned you 8% compound return over the next 5 years (say, the share market) it would be worth $489,625 in 5 years!!

That’s an extra $131,700 for doing absolutely nothing!

The table below lets you see how the numbers play out…

Mistake #4: Make financial decisions by your bank balance

Most farm owners make financial decisions by asking, “Do I have enough money in my bank account? If yes, I’ll buy this. If no, I won’t.”

But that’s the wrong way to manage your business choices.

Because when you make decisions by your bank balance alone, you miss the big picture.

It’s much smarter to base your financial decisions off of a cash flow forecast.

A cash flow forecast is an estimate of your income and expenses each month, based on where you want to end the year.

Think of it like a household budget for your business…

Imagine you’re saving for a holiday in June that costs about $5,000. In February, you get two speeding tickets that cost you $2,000, thanks to your lead foot.

Does that mean you can’t take your holiday? Not if you adjust your decisions!

If you know where you’re at relative to your budget, you can make some changes over the next few months to cut back and still afford your holiday. You certainly wouldn’t buy a new TV just because you see $1,000 sitting in your bank account, right? Because that money is earmarked for your holiday.

That’s why having a 12-month cash flow budget is so important.

Knowing your baseline of what to expect each month allows you to change your plan depending on what happens as you go. It’s a much smarter tool to make financial decisions from than your bank balance.

Profitable farmer solution:

Create a 12-month cash flow budget with predicted monthly revenue and expenses.

The most profitable farmers then benchmark their budget, allowing them to know exactly what financial result they will achieve if they follow the plan.

You want to create a cash flow budget that helps you maximise profit, given the circumstances that may play out. It’s not just about minimising costs!

We recommend that all farm owners develop a production model for their business, based on their assumptions re: predicted production outcome, costs, and income for the year.

Then stress test that with different price and season assumptions and prepare a monthly cash flow budget from your most likely outcome for next season.

Knowing what you will do differently in a top 20% season to maximise profit — and in a bottom 20% season to minimise the downside — are also keys to effective cash flow budgeting.

To help you get started, we’ve got a template to create your 5-year cash flow forecast. Just click here to download your free cash flow forecast template.

And there you have it: the 4 year-end financial mistakes most farmers make:

Making big purchases at year-end to “save tax”
Not negotiating with their lenders for better rates
Dumping a heap of money into FMDs
Not using a cash flow forecast to make financial decisions

Each of those four areas will enhance your profits in a unique way. If you focus on making those four changes this year — or even just one, honestly! — you’ll feel confident next June that you made smart financial decisions and made (and kept) as much money as possible.

Check this out next…

FREE Negotiation Skills Training

How to Create Wealth Off Your Farm and Generate Money While You Sleep

The 3 Key Financial Figures Profitable Farmers Track

Ready, Steady…… GROW!

Do you aspire to be a big operator?

Do you dream of being the biggest farmer with the most land in your area?

Do you get a major kick when you think of buying out your neighbours?

If so, Pump Up Scale (the eighth level of the TOP Producers Model) will help get you there. This steps all about rinsing and repeating your successful farm blueprint to expand your operation.

We had a client who set his 10-year vision to run 20K acres. And four years into his 10-year journey, he’s already hit that goal and is running 20K acres very successfully.

Yet he’s still hungry for more.

We met him in person recently, at the TOP Producers Event and helped him calculate that if he buys his neighbour’s farm and applies everything he learned inside the Platinum Mastermind, in five years’ time, he’ll make an additional $2million (in profit).

As this story shows, scaling is so appealing because you can make a great profit in a relatively short period of time.

Working through the TOP Producers Model, you’ve already done the hard work of learning how to build a great business. Now all you have to do is rinse and repeat the proven system.

Obviously, there’s a big opportunity here. BUT that doesn’t mean everyone should jump into Pump Up Scale. It’s an optional step.

Pump Up Scale is for those who truly LOVE the game of business

If that’s you, keep reading to learn the 3 main ways you can Pump Up Scale on your farm…

RELATED PODCAST: How to 10X Your Business and Scale Things Up

Scaling Strategy #1: Lease more farmland

Once you’ve worked through the first seven levels of the TOP Producers Model…

You’ve learned the skills to maximise the profitability of your farm…

And you’ve now got systems in place and people to do the jobs…

All the knowledge and work you’ve done on your current property, you can replicate it on another farm.

Why not apply that same blueprint on a leased block? The same way you would lease a house or a commercial property, you can lease farmland.

Think: McDonald’s. They keep applying the same blueprint in new locations.

The big benefit of leasing is that it doesn’t cost much to get started. The only real risk is the rent you pay on leasing that block.

Let’s say you pay $100K to lease a 1,000-acre block of land. If you’re a clever farmer, you might be able to turn that $100K into $500K of revenue by applying the same blueprint you’ve already used on your farm. So there’s a big potential for profit, even with the cost of the lease.

That’s why one of the most important things to consider here is getting the lease agreement right. It’s so important you get a good deal so you’re not paying too much rent so you can get a healthy return off that block.

The main downside of leasing is that you’re gonna improve someone else’s block.

You’re gonna work that block to improve it…and in the end, you’ll give that block back to the owner. So you won’t keep the benefits of any improvements you make.

You also won’t get the capital appreciation of the land. A lot of farmers make a lot of money off of capital appreciation. In the end, you could have great cash flow and great profit…but you won’t be growing an asset because you don’t own the block.

Scaling Strategy #2: Buy more farmland

If you like the idea of rinse-and-repeat but don’t want to improve someone else’s block through leasing, a second scaling strategy is to buy more farmland.

You might negotiate to buy out the neighbours or purchase a farm in your neighbourhood or buy a farm 500 km away— the choice is yours!

Again, it’s McDonald’s. You have the insight into what works so you can just apply the same successful blueprint to a new farm.

The benefit of buying is that you own the land, so you get the capital appreciation and any improvements you make are yours.

The main downside, of course, is the big capital outlay to buy the land.

You need to consult your budgets to make sure you don’t spend too much money.

This isn’t a decision you need to rush. Be patient and clever and flex your negotiation muscles…because the wrong buy price will erode your profits.

We help farmers work out what’s the maximum they should be paying for a new block of land inside our Platinum Mastermind Program (whether buying or leasing.) Because as Warren Buffet always states, you make your money on the buy, not on the sell — so it’s crucial you don’t pay too much.

Scaling strategy #3: Start another business

Richard Branson says, “Once you learn to run a business, there’s no reason why you can’t run a number of other companies.”

I can attest to this, too…

Farm Owners Academy is my fourth company. All four have been in totally different industries but they’ve all been successful because the fundamentals of business are always the same.

There are so many ways you could apply the same principles to different business ventures. Here are 3 of the most common:

1. Buy an existing business

There are a huge amount of businesses on the market right now because Baby Boomers are retiring.

Why not look through the business classifieds looking to buy a good business at a discounted rate? Taking over an existing business is often much easier than launching a brand new venture.

At this point in your journey, you’ll have the tools to jump in there and improve the business to increase profits. Plus, this option allows you to work in another industry outside farming, which is great for those who want to minimise risk and diversify their income.

2. Start your own business, outside the farming industry

Once you’ve gone through this whole process of learning the skills to improve your farming business, you’re in a position to start a whole new business in a different industry if that’s what you want!

One of our Platinum Mastermind members is currently launching a personal training business. Deep down, that’s what his passion is. He’s able to take all the skills he’s learned about running a farming business and apply them to launch a side business following what he truly loves.

3. Start a new business on your farm property

You can also find opportunities on your farm that you didn’t see before…

For example, a mate of mine runs a sheep farm…and they recently decided to launch a solar farm on their land. They’re creating a totally unrelated business to what their genius is on their farm to derive a new income.

It’s important to remember that the Pump Up Scale step is optional. That’s why we recommend everyone goes through the Open Up step first to see if this is a journey you want to take.

We have a farmer who’s been running the same 500-hectare block for years. He’s running a good business, making great money, and experiencing freedom. He’s got no desire to get a bigger block — he just wants to perfect the block that he’s got. And there’s nothing wrong with that!

As we always say, success is doing what YOU want…not what anyone else wants. So it’s important that whatever scaling option you choose — even if that option is NOT to scale — make sure it’s the right decision for you.

Want hands-on support as you scale your business?

Whether you want help to negotiate a land lease, buy out the neighbours, or look for a completely new business to buy, Farm Owners Academy can help.

Inside our Platinum Mastermind, you’ll have direct access to our decades of experience running million-dollar businesses across various industries. You won’t have to struggle through it alone; you’ll have mentors and other farm owners who have been through it.

Click here to learn more about the Platinum Mastermind program.

The 3 steps to growing your farm without you being there

Imagine for a minute that you’re a dentist and you own a one-person business…

You genuinely love what you do.

You spend your days cleaning the teeth of your patients.

Your schedule is jam-packed and you feel a real sense of accomplishment after a hard day’s work.

Sounds pretty good, right?

But here’s my question…

While you’re cleaning teeth and working IN the business…who’s working ON the business?

Who’s managing the admin and paperwork?

Who’s searching for new growth opportunities?

What’s the contingency plan if you get sick and can’t clean teeth anymore?

You can’t possibly have time to do all that important business-building work if you’re cleaning teeth all day.

It’s the same on the farm.

The seventh step of the TOP Producers Model is Promote Team, finding great people to run the farm for you. This is the real step that takes you from being a farmer to a farming business owner.

This is a big, big, BIG identity shift! I know it’s not easy.

But I can tell you that the handful of our farmers who have embraced this shift are the most successful ones in our community.

As I’ve said before, this is an optional step. But I invite you to at least educate yourself on what it would look like to grow a strong team…and then decide if you want to have a crack.

Because without the Promote Team step, you’ll never have real time- and financial-freedom on the farm.

The fundamental skill required in Promote Team is leadership. And to be an effective leader, you need to master three key components:

1. Create predictability and certainty with systems

The way to create a sense of predictability and certainty on your farm is through systems.

It’s essential to build systems to take all the things that you know about running your farm and document them in simple step-by-step processes that someone else can follow.

A great example here is McDonald’s…

Did you know McDonald’s have a system to keep their toilets clean? I learnt this at a conference recently…

Every three hours in McDonald’s, there’s a little alarm that goes off. An employee grabs a checklist and goes around cleaning the bathroom.

Clean the mirrors? Tick.

Wash the floor? Tick.

Empty the bins? Tick.

When the checklist is completed, the supervisor comes in to check their work. And because the employee is following a step-by-step checklist, it’s highly likely it’s been done right.

The key is, it’s not left to chance. It’s a system that ensures that bathrooms are kept tidy.

Systems can do the same thing for your farm.

For most farmers, everything lives in their heads. But in order to have your team members be successful, you MUST create systems for them to follow first.

2. Hire, train, and empower the right people

Once you’ve created clear systems throughout your farming operation, it’s time to hire the right people to run those systems.

This is where a lot of farmers struggle…

What often happens is that a farmer will find someone at their local pub. He’ll put that person on, dump on them whatever he needs, and that poor new hire goes out not really understanding what they need to do.

Because there are no systems, no protocol, no job description, that person ends up making a number of mistakes. The farm owner ends up fixing all those mistakes, tripling his stress. And then he sacks them and goes back to being the sole operator, saying it was all too hard.

Sound familiar?

Instead, when you master the art of hiring and communication, you’ll find, train, and manage a strong team that does the work exceptionally well.

It starts with knowing how to recruit well and find the best people for the job.

RELATED PODCAST: How to Hire a GUN Worker

Here are a few things you’ll need to master to be a strong team leader:

You start by clearly defining job ads and job descriptions, so potential employees will know what’s expected of them.

You also need a solid system to determine if applicants are the right people for the job. The person you’re hiring needs to get the job (understand what it entails,) want the job (feel passion and excitement,) and have the capacity to do the job (skills). They also need to be aligned with your values.

Once you’ve hired the right person, you need a clear Induction System to welcome them to your team. You’ll need to train them to understand your systems and processes so they’re capable of doing the work.

In addition to all that, there’s a second layer to this as well…

Once you’ve hired and trained the right people…how do you empower team members to do the job well?

It’s important to learn how to communicate effectively and provide feedback to continue to improve your new team member’s performance.

Good communication is a key skill of an effective leader. Your farm cannot thrive without it.

3. Trust and let go

I learnt something really interesting in the Platinum Mastermind program recently…

I asked this question to our community of farmers:

How many of you trust that someone else can do a job better than you?

Two hands went up…out of 150 people.

…Which shows me that there’s a real trust issue within the farming community.

Here’s why that matters so much…

BOTH of the people who raised their hands to say they trusted others run freedom farms. They’ve actually achieved the dream many of the other farmers envision for their lives.

That’s because you can’t build a farm that runs without you unless you trust others to do their jobs well.

Now, I’m not saying it’s easy…

If you’re like most of the farmers in our community, you’ve been brought up to think that no one can do a job better than you. So many farmers are petrified to let go because they don’t think anyone else will work as hard.

And I want you to know that’s simply not true.

Many of our clients have found team members who are incredibly hard workers (like Tim and Cheryl) There are great people out there who will give their all for your farm.

But you have to CHOOSE to trust them.

You have to make the decision to trust for the greater good of the organisation…because it’s not good for the farm if you’re the only person who can do the jobs. That’s not a healthy business.

If you want to enjoy a sense of freedom on the farm, you need to step back, let go, and TRUST that your systems and team will keep the business moving.

The key takeaway about effective leadership?

The most successful business owners lead from the back of the ship, not the front.

Think about the captain standing up — he’s not the one being busy…but the one overviewing and ensuring everyone’s doing their job.

When you grow a strong team, you’re able to really step back. This will give you a new layer of energy and clarity because you’re not busy anymore.

That’s when the REAL opportunities start flowing your way…

When you’re no longer busy on the farm, you’re now in a position to do what we call Deal Flow…which is going out to look for opportunities and expand your operation. (We’ll dig deeper into those opportunities next week on the blog.)

At the end of the day, we can either live to work…or work to live. You have the ability to create space and enjoy your life while running your farm. And it starts by becoming an effective team leader of your farming business.

Leadership is a never-ending education. Get the right support.

From creating systems, recruiting team members, and being an effective communicator, becoming a strong leader is challenging. That’s why the Platinum Mastermind community is such a game-changer.

You’ll be surrounded by business and farming mentors, plus other successful farmers who have been where you are. You’ll get advice from people who know what it’s like and have learned what works (and what doesn’t) to help you jump three steps ahead in your leadership journey.

Click here to learn more about the Platinum Mastermind program.

The best ways to grow your wealth…safely

Farming is inconsistent.

Some years, you make money…others you don’t.

The theory goes, out of every six years, you’ll make money in four of those years and you’ll lose money in two of them. It’s all part of the game.

That’s why it’s so important to be clever with your money in the good years.

Instead of simply spending your profits on “stuff,” I’d rather you put that money to work…

Earning interest
Diversifying your assets and de-risking your farm
Continuing to create wealth for decades to come

…So that you can sleep easy — even in the bad years — knowing you’re financially covered.

RELATED PODCAST: Could Your Money Beliefs Be Holding You Back?

Why financial freedom matters in the farming industry

Farming is one of the most volatile industries out there. When you’re as dependent on the weather as farmers are, there’s very little you can count on.

That’s why it’s so important to be smart with your profits during the good years.

When you get those good years, that’s not the time to spend…

It’s time to invest, invest, invest!

I recommend you take the money out of the business and do two things with it:

Reinvest a portion back into the farm
Invest the rest of the profits off the farm

Investing off the farm enables you to de-risk the whole situation.

Imagine if you had enough income coming in from outside the farm that it actually didn’t matter if you had a bad year on the farm…

Let’s say you owned your farm and had $2million invested off-farm. With an average return of 8%, you would receive $160K per year off your investable assets.

Thanks to the security that asset provides, the unpredictability of the farm wouldn’t bother you. You’d just be loving farming, you could still laugh and smile, and you wouldn’t really stress about what happens because you’d have enough assets off the farm to take care of you.

THAT’S what Procure Assets, the final step of the TOP Producers Model is all about.

Although this step falls under the Propel phase, which isn’t for everyone (click here to learn why), we think this is something EVERY farmer should pursue. We’re adamant that investing is a skill farmers really can’t miss.

Farming is too risky, in the end, to have all your eggs in one basket. It’s so important to diversify through off-farm investments.

Some of our farmers who have done this step really well make more money off their investments than their farms.

So what I invite you to do is allocate some time now to learn about how to procure assets. Don’t just have your farm as your only asset. Learn the skills to build your wealth.

Investing is a skill, just like anything else! Anyone can learn to do it…and do it well.

Let’s walk through the two most common off-farm investments you should consider, along with the pros and cons of each:

Off-Farm Asset #1: Property

The first way most farmers can grow wealth off the farm is through investing in residential real estate.

Real estate makes a great investment for a number of reasons…

First, you can create a lot of leverage, meaning you can borrow money to buy a house. Using the bank’s money to buy is a good option to have.

Let’s say you buy a $1million property and it grows at 5% per year. You’re making $50,000 per year…and because you’ve got leverage behind it, you won’t need to put up $1million upfront to purchase that asset.

The property market also gives you a certain amount of stability. In Australia, the property market has been very consistent, which is a nice balance to the unpredictability of farming.

There are a number of tax advantages to buying property as well, which can result in a significant cost savings. And property appears to be a finite resource, which makes it inherently valuable.

However, there are also a few cons to property investment…

It’s a high capital outlay. Although you can borrow money from the banks, you often need to put forward a sizeable chunk of money to purchase property.

It’s also a difficult asset to liquidate. There are usually fees of getting in and fees of getting out (typically about $100K to get in and out.) If you buy property and then want to liquidate quickly, it’s often hard and/or expensive to get your money back.

Finally, you have to consider maintenance and things going wrong with the house. You could buy a house that ends up needing lots of unforeseen work. For that reason, I say property isn’t a passive investment option. It can involve quite a bit of effort to maintain.

Off-Farm Asset #2: Shares

Personally, investing in shares is my favourite way to build wealth. There are a number of reasons for this…

First, you’re riding on the back of successful companies. This means it takes very little mental energy on your part. Someone else has to use their mental energy to grow the company…you just need to choose which companies to invest in.

It’s very cheap and easy to buy a share, especially compared to buying property.

Your returns can be high, particularly if you’re investing in US stocks. Returns are often significantly higher than the property market, if you know what you’re doing.

It’s also very easy to liquidate, which gives you a certain amount of freedom. In theory, I could sell my shares tomorrow and get my money back. That flexibility is really nice when you’re investing.

Investing in shares is also quite simple. It’s not simple to learn…but once you learn it, it’s simpler to pull it off than many other investment strategies.

The downsides to shares?

How the company performs is ultimately outside your control.

It’s difficult to find leverage, meaning banks are unlikely to loan you money to buy stocks. You’ll have to use your own money to invest.

There’s also quite a bit of volatility in the stock market. There are lots of ups and downs. Farmers are typically used to this volatility (and is one of the reasons farmers make such incredible stock investors) but it’s a point worth mentioning.

If you want to learn more about the shares market, I have three podcast episodes for you to get started. In each one, I interview Terry Tran, the investment guru I call “Australia’s Warren Buffet”, and the guy I trust to manage my own finances.

He’s the best person to teach everyday people about the shares market and he gives so much good insight on the podcast:

RELATED PODCAST: 3 Reasons Farmers Make World-Class Investors

Of course, investing isn’t just about money or becoming the richest person in the world.

It’s about security.

It’s about stability.

It’s about providing financial freedom for you and your family so you have the choice to live life however you choose.

Investing is a skill, just like farming. Even if you don’t know the first thing about investing right now, don’t worry — it’s something anyone can learn.

Go and engage the experts (some of whom I’ve mentioned in this blog post) and study their teachings. I promise, it will be an incredibly smart “investment” of your time.

Learn how to master the shares market…for free.

My good friend and investment guru Terry Tran created a training just for FOA called “How to Create REAL WEALTH Outside Your Farm Safely”.

What I love about Terry is that he teaches proven financial strategy…in plain English, no financial jargon included! During the free training, you’ll learn:

The 4 critical areas to consistent high returns…safely
How to get BIG RESULTS from small accounts (even if you’re starting from scratch)
How to take control of your family’s financial future by getting 9 out of every 10 stock picks right
And more!

If you’re even remotely curious about generating wealth off the farm, this training can’t be missed!

Click here to sign up for the FREE training.