Are you Sensitive?
£:€, £:$, €:$, conflict, import/export tariffs, Brexit, World Trade Organisation agreements, red tape, unknown unknows, all of these will impact on your business altering the price you receive for goods you sell and inputs you purchase.
We are all fully aware on the significant swings in fertiliser, fuel, feed and electricity prices seen since the turn of the year. You may feel that it is impossible to plan ahead with all the uncertainty, but you must. Producing five year plans is more important than ever to look at the impact on your business of these price shifts. We may not know what input and output prices will be in two months’ time, let along five years’ time, but if you budget ahead, you can then sensitise your figures to look at different scenarios and see the impact on profitability and cash generation for your business.
Sensitivity analysis is a simple but important process of looking at what a change in the main components of your business will do to profits. What happens if your milk price alters by 5 ppl, the feed price changes by £50 per tonne, fertiliser prices don’t drop, or interest rates go up by 3%? You also need to examine your businesses viability without a Basic Payment income.
Preparing now will give you time to implement changes to your business to reduce the risk. It will allow you to access borrowing requirements and determine whether or not investment can be paid for, helping to facilitate positive discussions with your bank manager.
If you would like to put together a five year plan and look at the firstname.lastname@example.org of input and output prices on your business contact Phil Cooper on 07798 673665 or e-mail email@example.com
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