In the past fifty years, more farms have gone under due to running costs and debt than they have because of drought, plague and pestilence combined. The reason for this is as simple as it is horrendous; farmers just don’t have it easy when it comes to making a profit. This is because running a farm is tainted by the high costs of equipment, taxes, land and labour. However, there is a reason why farming is the world’s largest industry, and that is because there are ways to succeed. To put it to you bluntly, your best chance of improving profits it to cut your overheads, and all that requires is knowing where you have the most control.
Read on to see our top tips on how you can increase your profits:
Stop Owning And Start Leasing
The benefits of leasing your agriculture equipment are becoming more and more impossible to ignore, especially in this day and age where technological advancements rapidly improve over a twelve-month period. That is where leasing really becomes attractive; it allows you stay up-to-date with the technology used to run your farm, making your operations far more efficient, timely and cost-effective. Another benefit worth mentioning is to do with working capital. Having such a large chunk of change tied up in equipment is a risk and one that massively limits your options and your ability to react to the market. The final thing worth mentioning is the additional costs surrounding ownership of farm machinery, of which there are many; storage, maintenance, tax, fuel, payment-plans and labour. These can add up real quick.
Storage Poses An Opportunity
A huge amount of profitability in agriculture comes from storage abilities. This isn’t just because satisfactory storage goes a long way in protecting expensive machinery but also plays an important role in keeping crops and produce in prime condition so that it commands a higher price at market. Of course, there are three main things to concern yourself with when it comes to storage and they are all solved by the use of steel, as you will see by reading Armstrong steel reviews. You see, my using pre-engineered steel storage barns, not only are are you saving yourself money, you are also going with a material that is durable, meaning the longevity of your structure is better. Not only that, but steel is stronger than the alternatives, meaning there is no need for support columns, maximising the space you have.
Use Tax Section 179 To Your Advantage
They say you can’t leverage taxes in your favour, but that isn’t quite the case within the agriculture industry, especially if you are leasing your equipment. This is because Section 179 of the tax code states that you can write off 100% of your leasing expenditure on their taxes as a deduction. Thanks to the fact you don’t own leased equipment, which means it cannot be viewed as an asset of your business, the Alternative Minimum Tax Rule won’t affect your tax filings either. It is well known that some tax benefits allow businesses to significantly reduce the amount of tax they owe, which is why the Tax Man has created a threshold for how much you can actually write off, but the whole leasing of equipment move simply goes around this. So, yeah, by decreasing what you owe you can easily reduce your overhead.