Rare business model sees advice backed up with investment

Features Posted 21/06/21
It’s the approach that’s favoured by leading farm management specialists Velcourt.

While there is no shortage of people who are happy to offer advice, there are far fewer who are prepared to back that advice up with their own cash – and fewer still who are happy to base their future remuneration on what that advice achieves.

It is a rare business model – it might even be unique – but it’s the approach that’s favoured by leading farm management specialists Velcourt.

The arrangement – described by managing director Nick Shorter as “a management agreement with finance” involves Velcourt providing 50% of the working capital of the farm, which not only allows the business owners to free up cash to pursue other interests but ties Velcourt’s commercial success inextricably to that of the business it is supporting.

Decisions on investment are shared, and while Velcourt manages the farm on a day-to-day basis, it does so in the knowledge that it has a major financial stake in getting the decisions right. To make that link even stronger, Velcourt’s fee for its management expertise is closely tied to the profitability of the business.

“Velcourt is unique in that 75% of its remuneration comes from profit sharing arrangements, which helps to focus the mind when making management decisions that will directly affect those profits,” explained Nick. “It’s also reassuring for our farmer partners, who know that our interest in getting it right is just as keen as theirs.”

It’s an approach that has clearly worked for the Fuller family, which signed the first Velcourt management agreement in Kent in 1977 and is, nearly 45 years later, the company’s longest-standing client. Set up by Richard Fuller, who owns Sutton Court Farm near Dover, the agreement is now overseen by the whole family, including his daughters Alice and Claire, who join him at regular meetings with the Velcourt team.

That team is now headed up by Jack Woolley, who has been assistant manager for the past three years but will be taking over as farm manager on 1 July when Andrew Cullinane retires after an impressive 40 years with Velcourt.

“Andrew enjoys almost legendary status with Velcourt and has thoroughly earned his retirement,” commented Nick. “During his career he has trained 24 managers, including one who now sits on the board, and has looked after and inspired 12 placement scholars.”

Sutton Court Farm covers 522 hectares of land which is used to grow traditional combinable crops including milling wheat, winter barley, spring barley, oilseed rape, beans, winter linseed and maize.

Under the management agreement with Velcourt, the family still owns the holding but only provides 50% of the working capital. Decisions on investment are made jointly but the day-to-day work is carried out by Jack and his team. Velcourt receives a management fee for the service, together with a share of the profits generated by the joint approach.

What is clear from visiting a number of Velcourt’s farms is that the owner’s involvement is not just encouraged but is welcomed. While managers such as Jack work in reality for Velcourt, they enjoy a solid working relationship with owners such as the Fuller family and pay close attention to their ideas and suggestions.

“It’s a bit like having two bosses, but as we are all trying to achieve the same thing – a profitable farming operation – that never becomes an issue,” Jack explained. “And as far as the owners are concerned, it still feels like their farm.” While a ‘formal’ quarterly meeting is part of the arrangement, for managers like Jack the conversations tend to be at least weekly and often daily.

One of the benefits of using a farm management specialist such as Velcourt is that the company can aggregate nearby farms under one umbrella, a practice which delivers huge economies of scale and the opportunity to make the fullest possible use of expensive equipment.

In East Kent, the centre of Velcourt’s operation is Martin Lodge Farm, which is adjacent to Sutton Court Farm and is owned by the Shieds family, based in Germany. The third farm in the East Kent set up is Swanton Farm, owned by R Martin Farms.

Together the three businesses cover 1,300 hectares of land, all managed by Jack and two tractor drivers, plus the usual summer support. “By bringing farms together we can provide an efficient service and perhaps bring neighbouring farms together in a way that would be more difficult if they were each running independent operations,” Nick explained.

It’s an approach that reflects the company’s origins. Four farmers who were studying ways in which they could improve their profitability realised that working together would make them each far more efficient, a realisation that inspired the launch of what, over the next few years, became Velcourt.

“In the normal run of events, two farmers might not be comfortable sharing ideas over the hedge, but if they are both relying on us to deliver the best possible returns for their business, they are usually happy for us to co-operate and work in a more cost-effective way,” Nick went on.

“In some areas we work across land that is owned by as many as seven different farming businesses. It’s difficult to see seven individual farmers or farm owners agreeing on a new single strategy – you’d probably find a couple of them might not ordinarily associate with each other – but when we are the common link, and they know that we are working to improve their efficiency or profitability, it happens.”

While the long-standing agreement with the Fuller family includes the shared finance option – Velcourt’s favoured approach – the company also offers a more straightforward farm management agreement, while some businesses prefer the standard contract farming arrangement Velcourt also offers. “In theory those are our three models, but there are probably at least 20 nuances of each of them,” Nick said. “In reality we have 120 clients and 120 different arrangements, which reflects our flexibility and our desire to come up with the right solution to each farmer’s needs.

“We listen carefully to what the landowner wants to achieve, carry out a thorough review of the operation and look at all the possibilities before coming up with a proposal that we think will deliver the best possible return to the business owner. In every case, our own success is directly linked to the performance of the farm, so we work hard to get it right and we build in a lot of flexibility.”

Velcourt today directly manages or advises on more than 90,000 hectares of land in the UK and overseas and increasingly now offers advisory services to farmers who manage their own land.

The company has a long history of carrying out independent research and development and investing in technology and data, backed up by its first-hand experience of growing crops and looking after livestock across much of the country.

“We realised that a lot of farmers were keen to benefit from our knowledge and our independent research but didn’t need us to manage their land, and so we decided to offer an advisory service that has proved very popular,” said Nick. Velcourt’s national advisory team has six arable specialists and a seventh who focuses on livestock. Along with technical advice, the team can also provide management guidance for a per hour or per hectare fee.

As well as expanding its advisory operation, Velcourt is increasingly looking to the future of farming, preparing for a post-Brexit world of reduced subsidies and new opportunities to earn money by delivering ‘public good’ via the Environmental Land Management scheme (ELMS) and other options such as carbon trading.

As farming changes, the company is determined to use its well-honed research and development skills, which have been contributing to the success of UK agriculture since the late 1970s, to ensure it can stay abreast of those changes and ensure the farms it manages benefit from them.

In doing so it will be relying on the strong partnerships and good relationships it has built up across the industry over the years, not just with the owners whose land it farms but with partners across the sector, including produce marketing, machinery and agro-input suppliers.

Clients who opt for a farm management agreement also get access to the favourable commercial deals set up by Velcourt as a result of its buying power and strong industry partnerships.

It means that while clients taking advantage of a management agreement are responsible for buying their own inputs, they pay less for them – and with Velcourt co-ordinating an aggregated £20m a year spend on fertiliser alone, the company’s buying power is second to none.

Velcourt provides the expertise of its farm manager and markets the crop centrally, in return for which it charges a management fee and again takes a share of the profit.

Velcourt’s contract farming agreement is broadly in line with the industry standard, with the landowner providing the land and funding the growing of the crop and Velcourt contributing the manpower, machinery and fuel. The profits are then split in a similar way.

What sets the company’s agreements apart is that the landowner gets not just a contractor but a farm manager who will run all aspects of the business, from sorting out grazing licences on pasture to completing both basic payment and Countryside Stewardship applications and claims.

“The important aspect in all our arrangements is that we are committed to the success of the farm because that’s how we earn most of our return,” Nick stressed. “There is no arrangement in which we don’t have an incentive do to the best we possibly can, whether that is financially or being rewarded for hitting environmental key performance indicators.” Nick has noticed a growth in interest from potential clients in recent months, not least because of the changes facing the industry. “There is lots of talk about new systems but a lack of hard advice on how to implement or benefit from those systems,” he said. “Velcourt has developed a reputation as a solutions provider – and we have to get it right for our own business to function, so farmers are increasingly looking to us for answers.

“Whether they then take advantage of our advisory service or talk to us about entering into a management agreement, they know that our goal will be to help them make their business as profitable as possible, both now and as new opportunities arise.”

At Sutton Court Farm, incoming manager Jack Woolley sees his role as maintaining the high standards set over the past 45 years, continuing to develop yields while at the same time focusing on the environment and taking advantage of Countryside Stewardship schemes and, in the near future, ELMS.

Sutton Court Farm has just entered into a five-year Countryside Stewardship scheme aimed at upping the return on marginal land and improving the environment. Jack sees it as offering a natural lead-in to ELMS. “The key driver is to maintain a profitable business while supporting the environment and improving the farm,” Jack commented, adding: “You can’t be sustainable unless you are profitable.”

Click here to read our full feature on Velcourt

Photos: ©Martin Apps, Countrywide Photographic


Tweets from @southeastfarmer