Industry sector:

Organic farm: Buy an existing business

You might decide to buy an organic farm rather than start your own venture from scratch. Buying a going concern can mean that:

  • the conversion to organic has already been done or is in the process of being completed
  • the farm buildings, machinery and equipment are already in place
  • livestock and/or crops (either in the ground or in store) are included in the sale
  • there are established customers
  • organic subsidy has already been applied for
  • suppliers have been identified and relationships established with them
  • the business has a track record which can help if you are looking for finance
  • staff are already in place

However, look critically at any business that you are interested in to make sure that the price you negotiate with the seller is a fair one. Try to establish why the business is for sale - for example, is the owner keen to retire or is there another personal reason for selling up.

Your market research into the sector as a whole and the locality in particular will help you to establish whether or not the owner is selling because he or she can no longer generate enough income from the business. This may not necessarily deter you - you may be confident that your proposed method of farming will be successful regardless of the previous financial results achieved by the vendor. However, it's a good idea to make sure that there are no underlying reasons that would prevent you from being successful, such as particularly poor quality soil.

Other matters to consider include:

  • the state of the farm buildings, equipment and so on. Will you have to spend money refurbishing or replacing assets
  • the health and condition of any livestock and planted or stored crops you are buying. Check this carefully before agreeing a price
  • existing workers' rights
  • how to retain key personnel once you've taken over
  • does the business owe money that you will be responsible for

Ask your accountant to look critically at the business accounts for the past three years and discuss with him or her the selling price in the light of what the accounts reveal. Make sure you budget for other professional fees such as legal fees and valuation and survey costs.