Managing a farm, being a farmer, takes 24 hours a day. It is in your blood. Your favorite spot is in the fields, in the middle of your crops. Feeling their quality and to optimally control and improve the ground conditions. As a farmer you don’t want to be behind your desk for too long or be involved in too much administrative tasks. You don’t have the time for that. Your focus should be on producing great crops. Unfortunately, this seems to get increasingly challenging. The farming industry is being overwhelmed with all kinds of legislation and regulations, distracting you from your core business and passion.
Obviously, things need to change, but how? There is so much we cannot control, but let’s focus on what we can control… As a global provider of financing solutions for agricultural equipment we monitor the market closely. At the same time we also look at other industries. Taking a cross-border perspective allows us to stay on top of global trends. ‘Servitization’ is one of those trends. A difficult word for a financial solution with huge potential.
The potential of ServitizationWhile the idea of Servitization was already there in the 1990’s, it is only now starting to gain real interest. It is about to become the next big thing in agricultural equipment. Servitization leads to the shift to using products instead of owning them. Servitization is already well-known in a wide range of industries, including automotive, materials handling and entertainment. Why is it so popular? Because it meets changing needs. For the agriculture industry, it can help farmers spend their time and money more wisely. These days, some farmers don’t want to own expensive equipment. Instead, they want access to equipment when and where they need it and want to make use of maintenance services that make their lives easier.
Flexibility and liquidity are the key to successThe world economy has fallen into recession. A lot of sectors are being hit, including the agricultural sector. Just think about the increasing environmental concerns and required budgets to follow digital developments. Or the lack of skilled employees. Not to mention the hard hit export market and financial pressure from decreased product prices, compliance requirements and competition from larger operations with efficiency advantages.
It is clear; farmers are forced to work in a different way to ensure future success. Flexibility and liquidity will be fundamental to this. Servitization covers both and can therefore be a welcoming helping hand. Servitized business can enable farmers to focus on their field, get cost transparency and flexibility and have access to state-of-the-art equipment and services. Servitization can reduce time and worry involved in purchasing and maintaining agricultural equipment. Sounds good, right? - but how can you as a farmer take advantage of it?
How you can benefitThere are basically 4 golden rules, but it all starts with shifting your mindset; buy what appreciates and lease what depreciates. This will give efficiency gains and enables continuous access to the newest farming technologies.
First golden rule:
Think beyond equipment and focus on services that improve your business. This allows you to choose a custom-made, pre-defined offering creating transparency and predictability of costs of operation.
Second golden rule:
Through full-service solutions you benefit from the usage of the new equipment while reducing the risks of ownership. Think for instance about the risk of missing out on productivity gains from new state-of-the-art technology. Or meeting the latest emission regulations.
Third golden rule:
New Smart Farming technologies have the potential to put you at the forefront of farming. However, investing in these technologies is often costly. New financing solutions, such as full-service leases make these investments more affordable and reduce your business risk.
Fourth golden rule:
Finally, start benefitting from customized payment plans that match your seasonal cashflows. This allows you to get a positive cash flow throughout the year. Imagine that you can start paying after you’ve harvested. This puts less pressure on your liquidity and allows you to start thinking about strategic investments that will improve your company’s long-term success.
The new reality will be different than the pre-crisis reality. Also, for the agricultural sector. But let's look beyond the limitations and challenges, and think in possibilities. Servitization can offer a helping hand here. This eventually will enable you to focus on your core business and passion – producing great crops – since that is what farming should be about.