Is it a win-win for both parties?
The mixed ownership of Ashpouri also means Will and Kim now have the equivalent of a 9% stake in Singletree Dairies while the van der Poels hold 91%.
Will’s and Kim’s returns from the business come in a number of ways.
Will earns a salary from the sharemilking business that’s set based on independent advice about the market rate for roles such as his but the couple also receive their 30% cut of Ashpouri’s profits, which is roughly equivalent to what they could earn out of a 1000-cow sharemilking job.
Added to that is their proportion of any earnings coming out of Singletree Dairies.
“When we started looking at what we were going to do to progress we did a lot of homework and looked at a lot of options.
“Going 50:50 sharemilking was the way we wanted to go but we knew we’d have to take on a partner because we just didn’t have the money to sharemilk at the scale we were aiming at.
“Then we thought who should that partner be, who should we be in business with?”
That’s where it was so important to have people who they were aligned with in terms of their goals, both personally but also in the business, Will says.
“We thought who is going to want the same thing for this farming business over the longer period and for us it was the farm owner.”
Jim and Sue also saw the benefits of keeping Will and Kim in their business as sharemilkers and partnering them in a sharemilking company but Jim also liked the idea of the sharemilking partnership having a stake in the ownership of the land too.
That’s because it aligned both parties further so Will and Kim also have an interest in looking after the farm as a whole.
Both parties benefit if the sharemilking job is doing well as they do when the land owning company does well.
It sets the scene for robust, long-term decision-making when it comes to capital spending in that all parties have a vested interest in both the shorter term cash returns any such investment would provide as well as the longer term sustainability of the business.
“And we get to be in business with two highly motivated and capable people,” Jim says.
Having such capable partners who are really committed to the whole business because they’re both the sharemilkers and owners of the land gives Jim and Sue confidence that the day to day running of the business is in good hands.
“And that frees me up to do other things,” Jim says.
As well as his farming businesses in both the South and the North Islands he’s also a director of DairyNZ.
The business structure adds security for both parties too.
Jim and Sue don’t have to worry that Will and Kim are going to be off at the end of a three-year contract and Will and Kim can put down roots in their community without having to hop from farm to farm to grow.
And that’s another aspect of the partnership that it’s important to get agreement on at the outset if the partnership is to have long-term success.
Some equity partnerships have failed in the past because the equity manager hasn’t been able to grow their equity stake in the farm, often because other partners haven’t been willing to incrementally relinquish their stakes.
The van der Poels are keen to see Will and Kim progress and Jim says the structure they have gives plenty of options for their growth.
If the sharemilking job’s going well Will and Kim build their equity and the sharemilking company is ready to go again which might mean it increases shares in the land-owning company as one of the options.
There’s also the option for the young couple to take a greater stake in the sharemilking company.
But Will and Kim’s firm belief that it has to be a win-win for both parties means they don’t take the view they should be able to grow their share as of right.
“It has to be fair and equitable – there’s got to be something in it for them,” Kim says.
The growth strategy for Will and Kim so far has been about growing their equity in the business but also about growing the whole pie rather than the slice they have of it.
The cash they earn allows them to service debt to buy into the sharemilking business while the cash from the sharemilking business allows them, through the sharemilking job, to have a stake in the land.
To date growing the pie has been about growing cow numbers in the sharemilking business.
Over the past two seasons Singletree Dairies has expanded so Ashpouri numbers have increased, going from 1600 to 1800 cows over the past two seasons and stepping up to 2400 cows this season.
Ashpouri also took on a 50:50 sharemilking contract for Chertsey Dairies, initially leasing the cows before buying all 860 cows outright in time for this season.
Will says their overall farming goal is to be part of a profitable and increasingly wealthy business rather than a goal that defines specifically what that business might look like, how it’s structured or if they have to have full ownership of it.
It’s not about solely owning a farm per se themselves although they certainly feel like Singletree Dairies is their home and they treat it just as they would if they owned it outright.
They say Jim and Sue make it easier for them to feel that way because they live elsewhere and give them the leeway to run the business on a day-to-day basis.
Will warns against being too prescriptive when it comes to setting end goals because it can narrow down your vision so you’re not open to other opportunities.
“You have to be careful you’re not so hung up on the goals and pathways you’ve set that you don’t miss a pathway that’s actually staring you in the face.”
Forming good relationships with people who have similar values is one of the key success factors for a good partnership in business.
“And that advice extends right through to dairy assistants who want to progress.”
Will tells people who are keen that they’re better off identifying the people they want to work for or with and then go and knock on their door.
“Opportunity won’t come knocking at your door. You’ve got to actively look for it, make it happen and have the skills to recognise it when it’s there,” Will says.
For Jim and Sue the model developed at Singletree Dairies is working so well it’s been repeated on other farms they have an interest in.
Part of what’s made the NZ dairy industry great has been the ability for young people to come on through the ranks and reach farm ownership but the way they achieve that now is varying from earlier years, Jim says.
“In my generation we went through the sharemilking system and when we had enough equity we bought our own farm.
“The next generation followed a similar pathway but they built up enough equity to get a reasonable stake in a farm,” he says.
This generation of young farmers is very capable but it’s hard to get enough equity to get even a reasonable stake in a farm using the traditional pathways.
But with innovative thinking, partnering with the right people and a win-win attitude to business relationships that doesn’t have to be the case.
