Building Better Sustainable Horticulture Businesses (LP20001)
What was it all about?
This program equipped Western Australian horticulture growers to make data-driven business decisions by providing access to rigorous industry-level insights on financial and production performance.
Challenge
The program aimed to address a previously identified gap in Western Australian horticulture business owners' business and financial management practices.
The project was well-timed, given that it commenced during challenging times—including COVID restrictions, geopolitical unrest, rising inflation, input costs, and labour issues in the horticulture industry.
Response
The project provided annual 1-2-1 (one-on-one) expert farm management analysis and consultancy, from which wider WA horticulture industry benchmark data and insights were produced covering four financial years from 2019/20. As the co-investors, the project initially focused on vegetable and pome growers and then broadened to include other horticulture industries.
Benefit
An independent review found that the project successfully supported 77 per cent of participating growers in improving their understanding of business and financial management and making business changes towards improving profitability and future longer-term asset growth.
Key consistent themes arising from consultations with farm management consultants were a deepening understanding of links between paddock practices and profit. They associated specific key profitability drivers to inform critical business decisions – particularly zeroing in on crop selection in terms of capacity to generate profit.
Among the findings of the four years of benchmark WA horticulture industry analysis, key points included:
- The increase in the operating efficiency from 78 per cent in 2019/20 to 84 per cent in 2022/23 highlights that it is costing the average WA horticultural business more to generate income.
- The return on capital for WA horticulture businesses has fluctuated over the previous four years, from 6.3 per cent in 2019/20 to three per cent in 2022/23, with the return on capital around four per cent for the 2020/21 and 2021/22 seasons.
- The business equity percentage for the WA average horticulture industry increased from 78 per cent in 2019–20 to 85 per cent in 2022/23.
Overall, the average WA horticulture producer has solid equity, a strong balance sheet, and a resilient balance sheet against current industry forces. However, there is concern that most of the balance sheet strength is from increasing asset values (namely land and water) rather than generating strong profits.
Further detailed analysis was produced for the top 25 per cent of the most profitable businesses and the WA vegetable and pome industries.
Finally, a Horticulture Business Analysis Tool was created and made publicly available for the benefit of the wider horticulture industry beyond the end of the project. The tool empowers business managers to independently undertake a high-level business performance analysis by generating financial and production performance ratios in a simple report.