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How to Make Your Banker Work For You
- 1. How to Make Your Banker Work For You
- 2. 2 Featured guest: Kristjan Hebert • Managing Partner, Hebert Grain Ventures • Director, Global Ag Risk Solutions • Founder, WorkhorseHub • Texas A&M’s TEPAP • Advisory Board Member, Bayer Crop Science & Federal Economic Agri-Food table • VP of Sales, Granular • Joined founding management team in 2013, holding several roles as company grew from 10 to 500 employees • Former biofuels commercial lead and healthcare investment banker Adam Litle
- 3. 1 / The 5% Rule 2 / Risk Management Strategies 3 / What Underwriters are Looking For 4 / Questions & Answers
- 4. We are now in the Moneyball decade
- 5. 5 The 5% Rule in Farm Profitability Small actions can lead to large gains Goal: Increase yield and price received by 5% and decrease expenses by 5%
- 6. 6 Better is Better, before Bigger is Better 0 50 100 150 200 250 300 350 2010 2011 2012 2013 2014 2015 Top Producer Average Producer Dollars/Acre
- 8. 8 But First... Do you know what your breakeven is? Do you know how much money you can lose? Do you know your working capital requirements?
- 9. 1 / The 5% Rule 2 / Risk Management Strategies 3 / What Underwriters are Looking For 4 / Questions & Answers
- 10. 10 Risk Management Strategies • Your working capital percentage • Debt service • Yield vs. margin programs
- 11. 11 How Much is Your Working Capital? Current Assets - Current Liabilities / Next Year’s Op Expenses = Working Capital 3M - 1.5M = 1.5M / 4M = 37.5% • 10,000 acre farm • $150/acre = working capital • $400/acre is next year’s operating expenses
- 12. 12 Can you Service Your Debt? Net Income after tax + depreciation - interest on term debt + capital eases - owner draws / annual principal payments + capital lease payments = debt service Needs to be a minimum of 1.25
- 13. 13 0 100 200 300 400 500 600 700 800 Planning Planting Herbicides Fungicides Extra Pass Harvest GARS Current Risk Level Why Margin Protection is Important Good Harvest Poor Harvest Crop Insurance 244 407 CostorProduction
- 14. 14 Why 5% Matters 271 332 280 271 279 354 404 191 231 170 176 176 220 262 115 133 135 146 154 167 182 80 101 109 95 102 134 142 0 50 100 150 200 250 300 350 400 450 2007 2008 2009 2010 2011 2012 2013 Average of Revenue $ / Acre Average of Gross Margin $ / Acre Average of Input $ / Acre Average of Fixed Costs $ / Acre Dollars/Acre
- 15. 1 / The 5% Rule 2 / Risk Management Strategies 3 / What Underwriters are Looking For 4 / Questions & Answers
- 18. 1 / The 5% Rule 2 / Risk Management Strategies 3 / What Underwriters are Looking For 4 / Questions & Answers