By: Sara Schafer, Top Producer editior. Previously published on AgWeb Daily.
If thinking about negotiating cash rental rates makes you sweat—you’re not alone. This annual task can be unnerving, especially if you are asking for a rental reduction. The current cloudy profitability and policy picture adds even more pressure this year.
How can you confidently communicate your side of the discussion and secure a rental rate that will hopefully put you in the black?
Spend time preparing for these vital meetings and use negotiation best practices. You can’t take the easy way out, says Mark Faust, business consultant and columnist for AgPro.
“Negotiations are the most valuable per-hour work you ever do in your life,” says Faust, also the author “High Growth Levers” and “Growth or Bust: Proven Turnaround Strategies to Grow Your Business.”
Employ these negotiation strategies.
Outline a meeting schedule.
Most farmers have several landlords. With Sept. 1 being the annual renewal (or termination) date for farmland leases in most states, time is ticking.
“Map out on a calendar of how and when you’ll meet with everyone,” Faust says. He suggests looking at your landlord list and identifying which discussions may take the longest and start with them first.
Do your homework.
The best way to increase your personal confidence in negotiations is to be prepared. Block out time to prepare and think through each conversation.
“Most of the time we only think about ourselves in negotiations,” Faust says.
Instead, think through the agreement from your landlord’s perspective. What are the soft and hard costs if you change your lease terms or don’t come to an agreement? What questions you landlord will have? What are their goals and objectives for their land?
Through this process, you can create a list of options for each landlord, such as a change in the rental rate, a different lease type, less or more field maintenance, etc.
Plan on multiple meetings with each landlord.
“There’s a false belief that a negotiation must be completed before you leave,” Faust says. “It’s better to slow it down and space out the conversation to make sure it’s a win-win for both parties.”
For example, the first meeting with your landlord should be for you to present an overview of the previous year and your expectations for the upcoming year. Paint your profitability picture, which may be pretty bleak right now.
“Show a business case for how they are mitigating unprofitability and market volatility,” Faust says.
After that initial meeting, schedule another time to actually decide on the rental rate. “In two or three conversations, you can refine and zero in on what you want to agree to, without rushing it,” Faust says.
Also, never negotiation alone, Faust advises. Maximize your family or team’s talent to increase your odds of success.
Present multiple options—not “yes” or “no.”
Most people come into negotiations with undefined goals. Instead of a specific target, they just want to “move the needle” on a price. That’s not adequate, Faust says.
“Through your preparation, you can create your ideal agreement,” he says. “Write it down, so you can work backward from it.”
Share the multiple options you crafted in your preparation with your landlord.
“Negotiations are not a zero-sum game,” Faust says. “It’s not about splitting the pie, it’s about expanding the pie.”
Show your commitment.
An easy and effective way to create rapport with your landlords is to be open about your respect for them and their land.
“Share your love for the land and talk about your commitment in being a family farm,” Faust says. “One of the ways to negotiate more effectively is to show your vulnerability and humanity.”
Talk about your strategic outlook and how you are a proactive farmer who is dedicated to the industry. “That can impress the heck out of people,” he adds.
Demonstrate your appreciation—year-round.
Even though rental negotiations happen annually, your communication with your landlords should be consistent. Faust has seen some farmers create a marketing calendar, so they are sending something to their landowners every four to six weeks.
This could be a newsletter, calendar with pictures of their farm or gift cards. “Those things make a big difference,” he says.
For more news and resources on how to negotiate cash rent prices, visit agweb.com/farmland