Managing a farm, being a farmer, you are 24/7. It is in your blood. Your favorite spot is to be standing amongst your crops, feeling their quality and to optimally control and ameliorate the ground conditions. As a farmer you don’t want to be behind your desk for too long or be involved in too much administrative burden. You don’t have the time for that. Your focus should be on producing great crops. Unfortunately, this seems to get increasingly challenging. The industry is being overwhelmed with all kinds of legislation and regulations, distracting you from your core business and passion.
With the new year in front of us, there is a natural moment to reflect and look back, but more important, to look forward. Obviously, things need to change, but how? There is so much we cannot control, but let’s focus on what we can control… As a global provider of financing solutions for agricultural equipment we monitor the market closely, whilst we also look at other industries. Taking a cross-border perspective allows us to stay on top of global trends. ‘Servitization’ is one of those trends. A movement with huge potential.
The potential of Servitization
While the idea of Servitization came into being in the 1990’s, it is only now starting to gain real momentum. It is about to become the next big thing in agricultural equipment. Servitization entails the shift from producing and selling products to providing and selling services, or a combination of products, services, and sometimes consumables. Servitization is already making a splash across a wide range of industries, including automotive, materials handling and entertainment. Why is it so popular? Because it meets changing needs. For the agriculture industry, it can help farmers spend their time and money more wisely. These days, some farmers don’t want to invest in and own expensive equipment. Instead, they want access to equipment when and where they need it.
Flexibility and liquidity are the key to success
2020 is not going to be too different. In fact, we probably can expect more challenges to come our way. From rising environmental concerns and required budgets to follow digital developments, to scarcity of skilled employees. And from financial pressure in terms of compliance requirements, to pressure from larger operations with efficiency advantages. It is crystal clear; successful farming operations will require new ways of doing business. During 2020 and beyond, flexibility and liquidity will be fundamental to future success. Servitization covers both and can therefore be a welcoming helping hand.
Servitized business can enable farmers to focus on their field, attain cost transparency and flexibility and have access to state-of-the-art equipment and services. Servitization can reduce time and worry involved in purchasing and maintaining agricultural equipment. Sounds good, right? - but how can you as a farmer take advantage of it?
How you can benefit
There are basically 4 golden rules, but it all starts with shifting your mindset; buy what appreciates and lease what depreciates. This accomplishes efficiency gains and enables continuous access to the newest farming technologies.
In addition, think beyond equipment and focus on services that improve your business. This allows you to choose a tailored, pre-defined offering creating transparency and predictability of costs of operation.
In the meanwhile, through full-service solutions you benefit from the usage of the new equipment while reducing the risks of ownership. Think for instance about the risk of missing out on productivity gains from new state-of-the-art technology. Or meeting the latest emission regulations. New Smart Farming technologies, for instance, have the potential to put you at the forefront of farming. However, investing in these technologies is often costly. New financing solutions, such as full-service leases make these investments more affordable and reduce your business risk.
Finally, start benefitting from customized payment plans that match your seasonal cash flows. This allows you to retain a positive cash flow throughout the year. Imagine that you can start paying after you’ve harvested. This puts less pressure on your liquidity and allows you to start thinking about strategic investments contributing to your company’s long-term success.
So perhaps at first glance 2020 seemed to be challenging but let us benefit from this new start and start embracing servitized business. This eventually will enable you to focus on your core business and passion – producing great crops – since that is what farming should be about.
Would you like to know more about servitization? Download our whitepaper here