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Cash Rent Communication-Basics
Jul 25, 2011
Sometimes it's easier to avoid having conversations rather than to deal with the unknown. No one really knows what markets, the economy, the government, or yields will have in store for us in the next year! Extreme volatility is making cash rent discussions increasingly difficult. This uncertainty creates a compelling argument for sitting down with your landlords and discussing options for the coming years sooner rather than later. In the next blog I'll discuss specifics with regard to maintaining mutually beneficial rental arrangements. In this discussion however, I'd like to discuss the two primary & basic components which fundamentally make any business relationship viable, Communication and Trust.
Communication: In this instancecommunication is the transfer of information from one to another in order to understand and develop a mutual solution.Not only do you need to have a comprehensive understanding of your business but you also need to be able to explain your business to family, partners, employees, lenders, and yes-even landlords. The key isn't to explain everything, but rather, to explain everything that is appropriate. Open and honest communication is a cornerstone to any relationship. The more time you spend talking to someone the easier communication becomes over time. The more questions you ask to understand their needs, the more detailed the conversations can become. Obviously, the more detail you receive from conversations the more progress you will have toward building a higher-quality relationship.
Another approach is to explain your goals and the processes for achieving them. There are many dynamics in farming operations that can shift and change. The more a landlord understands about your operation the easier it is to come to agreements. For example, let's assume the need arises for a fungicide or insecticide application and your cost of production increases by $50 per acre. If you're already communicating your income and expenses, additional costs or other unique changes in your margin will be open for discussion. Conversely if you rarely discuss variables or changes that occur during the year, good luck getting any sympathy as you face an unforeseen challenge. I realize that some landlords are just interested in cash; however, producers with the best communication skills always have a distinct advantage. Investing time in conversations on a regular basis with landlords can pay huge dividends for both parties. Any solid and lasting business relationship is a two-way street.
Trust: Trust is the other fundamental component which is the glue that holds communication together. Without the tenant and landlord trust component there would be little chance of having more than a one year rental agreement. Trust is usually a black-and-white issue; however, there are levels of trust which can lead to numerous types of rental agreements. The more unsolicited information you can provide landlords the more you can develop their trust. For example, providing a comprehensive report which includes cost of production details, detailed marketing information, and detailed yield mapping can improve trust with most landlords. Sharing details with landlords helps to limit their assumptions. Facts are always the best ingredients for building trust. Generally your record keeping processes will also improve knowing that this information will be shared with the landlord, an additional side benefit for you. Some landlords may require less information than others but keep in mind that just because they aren't asking for it doesn't mean they aren't interested in it! Trust is built on a willingness to share information.
In the next post we will discuss specific questions and processes related to effective cash rent communication.
If you have questions with regard to effective communication processes or decision tools please send your questions.