Do’s & Don’ts of Business Partnerships

Jan 4, 2024 | Uncategorized

Before starting your next business partnership, consider these do’s and don’ts of universal business partnership principles I’ve adapted for ag businesses:

The Do’s

Evaluate Compatibility in the Agricultural Context: Farmers seeking partnerships need to assess potential partners based on shared visions for agricultural practices, commitment to sustainable farming, and perspectives on managing seasonal pressures.

Search for Complementary Farming Expertise: Successful farm operations often require a diverse set of skills, from animal husbandry and crop cultivation to mechanical proficiency and technological savvy. A partner should fill skill gaps crucial for comprehensive farm management.

Conduct Ag-Specific Background Checks: It’s essential to confirm a potential partner’s experience, success in production, livestock management, or even their handling of past agricultural crises, ensuring they can contribute positively to the farm’s operations.

Discuss Financial Protocols Transparently: Given the capital intensity of farming, clarity about investment in equipment, livestock, seeds, and response to market fluctuations is vital. Partners should agree on financial contributions, distribution of profits, and strategies for potential debt or loss scenarios.

Establish an Agri-business Exit Strategy: Farm partnerships should consider terms under which partners might exit, including the sale of land or assets, transfer of responsibilities during planting or harvesting seasons, and protocols in case of personal emergencies or health issues.

The Don’ts

Avoid Partnerships Based on Insecurity: Entering into partnerships solely due to fears related to market pressures, financial instability, or workload anxiety isn’t prudent. Partners should provide tangible operational value and resilience to the farming enterprise.

Don’t Ignore Disparities in Commitment Levels: Farming demands substantial physical and time investment, especially during peak seasons. Potential partners must be ready to match these commitments to ensure fairness and shared responsibility.

Never Rely on Verbal Agreements: Given the complexities of farm management and land ownership, written contracts are indispensable. These should detail asset management, operational roles, dispute resolutions, and contingency plans for crop failure or market downturns.

Reconsider Partnering with Friends Without Professional Basis: Friendships based on non-professional interactions should not be the sole reason for forming partnerships. Understanding each other’s farming approaches and accepting the risks involved are crucial. A trial collaboration during a planting season could help assess compatibility.

Identifying Potential Partners:

In the ag world, potential partners might be fellow farmers, neighboring farm owners, experienced employees from other operations, or academically trained individuals passionate about farming. Essential is a thorough evaluation of their farming knowledge, skills, and work ethic.

In summary, creating a thriving ag business partnership requires more than just a shared interest in farming.

It demands strategic pairing based on compatible visions, complementary skills, and mutual commitment levels, all formalized within a legally sound partnership agreement. This approach ensures that the partnership can weather the inherent uncertainties of agricultural production and market forces, contributing to a resilient and productive farming operation.

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