Land costs could make or break 2016 profit margins based on current grain prices. Learning what your landlords really expect and need is step one in negotiating the best lease deal possible.
"What is your long-term value to the landlord? Do they value how you manage and care for their land?" asks Lance Burditt, senior director at Water Street Solutions, a consulting firm in Peoria, Ill.
Burditt, born and raised on a Missouri farm, says the key to success is to know what each individual landlord expects and needs beyond a rent check.
"Not everyone wants the same thing," he says. "An 80-year-old widow may expect or need something different than a 37-year-old attorney or doctor. A one-size-fits-all approach isn't going to work. You should know the expectations and needs of each landlord, each person."
Your negotiation approach for 2016 should include transparency, tactful education and, perhaps, some lease creativity. Ask yourself:
• Have you gotten to know your landlords and learned their idiosyncrasies?
• Do your landlords see land only as an investment with an expected annual return? What other values do you share with them?
• Do they have a long-term goal to keep or sell land?
• How do you work the next generation into the landlord relationship? Is there a strategy you can develop to buy the land if it will soon move to the next generation of nonfarm heirs?
"As CEO of your farm, you must position yourself or someone on your team with the high priority of customer relationship manager," says Burditt.
If you have two or more landlords, create a database – a spreadsheet, website or notebook – and create a file for each landowner. Use this to track your business history and relationships. Make notes on their values. Let's say one of your landlords complained about taxes; that may be an opportunity to suggest a cost-share project like drainage tile, which allows them to lower taxes.
Find out how each of your landlords expects and wants to be communicated with. Some don't want to touch a computer and some won't pick up a newsletter. Make sure you are connecting with each individual in the manner that best suits them. If your operation is poised for growth, you can also use your database to make notes on prospective landlords.
Create a password-secure login at your farm's website where each landlord can see photos and information on their farm and other farm-related events. "Some landlords might see that as a value, and some may never log in – but their kids might," says Burditt. "The digital generation would likely rather interact through the Internet."
Now think about how your landlords view their farm. How many look at it as their family's legacy, and how many see it as an investment? Knowing exactly how they view that asset, you can customize your communication with them.
Communicating with the next generation of owners will be tricky, but it's a good idea if the land you rent is clearly a family legacy. The average age of a farmland owner is 66 right now; 70% of rented land is owned by females and two-thirds of them are over 65 years old. Also, 15% of rented land is owned by someone who lives 150 miles away from that asset.
"As land moves from one generation to the next, you could potentially go from 12 landlords to 100 in the next five years," says Indiana farmer Brad Starr. "And the average age of your landlords could go from 70 to 35."
So how do you develop a relationship with the younger generation? Introduce yourself and let them know who you are and your relationship with their folks and the farm. Reach out using the communication method they are comfortable with — perhaps email or texts. Make sure landlords agree with the plan before reaching out.
Consider using new technology as a conversation starter. This summer J.D. Kuhns, who farms in Arthur, Ill., used a drone to take aerial videos of the farm he rents, and shared the vids with next-gen landowners from San Francisco and New York. "It only takes 10 minutes using this technology," he says. "You're going to have to use technology to connect with the next generation."
You can add value to your business relationship by helping landowners get their kids interested in the farm. Don't bother with snail mail; try email, Facebook, Twitter or text-messaging with links to interesting websites, including your farm. The next generation is comfortable with data and will expect more transparency than current landlords.
"If you don't give them the information they deserve on the asset they're entrusting you with, they will go find it and seek it out from other parties, often who are less knowledgeable than you. Which options seems more promising for a long-term relationship?"
Check out part two! What do landlords want? Making your strengths stand out