What To Expect When Selling Your Business
After 40 years of berry farming, 30 by my wife with my weekend help, and 10 recent years of intensive expansion since my university retirement, we are ready to slow down and pass our berry land and U-Pick berries business to a much younger family. Fortunately, such a family found us last summer while we were still considering the idea. So, since we are in our mid-seventies, last fall we began earnest discussions with them, and they began searching for how to finance this purchase.
We are about 5 miles from downtown Blacksburg, VA, and also located conveniently near the cities of Radford and Christiansburg. The town of Blacksburg is steadily creeping closer to us. The town limit sign is just 2 miles away by road from our driveway and our U-Pick parking field. A new housing development is rising in sight of our berry fields. Our small, 12-acre berry farm has an ideal location for urbanites to obtain their ripe, full-flavored, locally grown berries. It has taken us decades of hard work to bring it to a very profitable state with a slate of more than 2,000 enthusiastic U-Pick customers on our berry pickers’ eMail address list.
The Process Begins
We see our berry business, our life’s work, in two dimensions when it comes to compiling a total sales price: selling the land, and selling the value of this berries business. This is the part where the fun begins. First, we hired an appraiser to come and appraise the land in order to establish a fair market value for the land. We also asked if he wanted to appraise our berry business value; we would gladly share several past years of our IRS Schedule Fs showing berries income and expenses. He said no, he was not qualified to do that.
Meanwhile, our buyers made a loan application with USDA’s new first-time farmer support loan program, designed just for such folks wanting to actively begin farming for the first time, folks that did not inherit a farm or marry into one.
USDA asked us to supply many items, including past years’ Schedule Fs, average yields per acre, number of acres in each berry crop, list and value of our farm equipment; all good, pertinent questions which we answered in good faith. We were full of hope for their funding help to our buyers. An FSA district person came and walked over the berry fields with us to see our berries, land, and business. But then somewhere in their process, they mentioned that they could not secure on a deed of trust the value of the berries business. It became apparent to us that we either might have to owner-finance our berries business or our buyers might have to seek other financing.
USDA did finally approve our buyer’s loan application, subject to their own land appraisal. Their appraiser, a USDA FSA certified appraiser and USDA employee, arrived in mid-March. When that appraisal report was completed and revealed, it confirmed a land value that we considered to be a fair price, but made no attempt to evaluate our berries business or even acknowledge that this farm business, our life’s work, even has value.
Who Needs More Houses?
Berry growers please note: You need to be aware of such trivialization of the economic and social worth of your berry business and farm by ag lenders! I quote from this USDA appraisal: “The property currently operates as a ‘pick your own’ berry enterprise. The land is planted in young and mature producing highbush blueberry, primocane raspberry, thornless blackberry, strawberry, and asparagus plantings. Other improvements include a 160-foot drilled well and nine underground irrigation lines with hookups to serve the various production fields. The subject real estate is currently zoned A1/agriculture. It is vacant and available for development to its highest and best use. It is the opinion of the appraiser that the highest and best use of the subject property is residential. This represents the legally permissible, physically possible, financially feasible, and maximally productive use of this property.”
Well, we and our U-Pick berry customers would strongly disagree with the above quoted statements. All open farmland, including small farms near towns and cities, does not need to be placed in housing developments. We are shocked and dismayed that USDA seems to be encouraging such residential development of small berry farms near urban areas. We compiled from our records of investing in berry nursery plants our costs of all current income-producing plants, our establishment costs of all plantings, our farm equipment costs and its current estimated value, all drip irrigation and well costs, value of all pruning equipment and check-out stand, and even our cost of developing entry and exit driveways to our U-Pick parking field. Also, we figured that our well-established farm name has local recognition value, as does our electronic list of customers. After all, our customers are the support system of our berries business.
To determine the business value of all these items, we contracted with a retired horticulturist from the Ohio State University, Dr. Richard Funt, to appraise the value of our berries business. He did so and added his figures to the appraised land value. His berries crops business and production/marketing expertise is nationally recognized; plus, he is also a berry farmer. If and when you decide to retire, we recommend strongly that if you plan to sell your berry farm, you too should contract with such a recognized berries business and production expert that can evaluate your berry business with undisputable authority that you can take to the bank or to court!
As this is written, we have signed a buy-sell agreement with our younger family buying our berries land and business. They are working with their local bank, comparing loan terms with Farm Credit Cooperative and with USDA. We plan to continue to live here, across the road from the berry land where we have lived for so many years. We will continue to mentor and help our new berry farmers to maintain this successful berries business. Since last August they have been working here with us to learn and do fall planting, mulching, winter and early spring pruning. For sure, our customers are very happy that “their” berries supply will be continued on into the future.