It is that time of year again—the end of financial year—when you start looking at the figures and wondering about next season.
There is a parallel here with pruning. Compare removing a non-productive, vigorous, nutrient–devouring limb; with that of cutting from your fruit producing business any non–core element that is consuming time or money, and fails to generate profit.
Buy or subcontract?
Some new orchard equipment can be very costly.
When the time comes to replace it, it might be worthwhile considering just how many weeks a year it will be used, and if it would be more financially efficient to hire a local contractor to undertake that work.
Also consider the implications of the difference in tax between depreciation of the equipment, and the tax deductibility of using a contractor.
It’s also worth questioning your current business structure—will it be the same in five years?
Your accountant should be able to offer some guidance and advice.
Review your business plan
Review your business plan at the same time as the orchard review.
Try to identify what might change in the next five years and how that may affect your business. To start with, you will be five years older! Should there be a succession plan in place?
If you are exporting cherries, can you continue to generate a profit if the Australian dollar is US$1.10?
Have you calculated your potential production (in tonnes) for five years time?
What are your competitors up to and where will they be in five years time?
Should you look at packing and selling by an outside party, or work with another cherry producer to achieve economies of scale?
Cost and availability of labour also needs to be considered, and so does the availability of trained people with horticultural skills at a management or supervisory level. Are they to be found currently? Will there be fewer of them in five years time?
Generate more profit
Along with all these factors, the main thing to be aware of is how to generate more profit (not necessarily more production) from your cherry business.
To do that you need to recognize who your customers are and to talk to them. Make sure you give them what they want and maintain a healthy relationship and open communication.
For more information, download the August 2012 issue of Tree Fruit
