Landlord Negotiating Tips
In discussions with landlords, we can learn from marketing best practices from other industries.
Most successful businesses look outside of their industry when trying to improve. Farming should be no different.
I recently hired a sales and marketing expert from the software industry to expert to help farmers grow and strengthen their operations. Specifically, on how to use high-level sales/marketing techniques when working with current and potential landlords.
Key Marketing Concept: Focus on Benefits, Not Features
The best recent example of this concept is when farmers discuss lease structures with their landlords. I’ve reviewed a number of these negotiations and producers tend to focus on the features of the contracts and the benefits to the farm rather than the benefits to the landlord.
And who can blame the farmer?! They’re busy feeding the world not focusing on ways to improve their marketing skills.
It’s the producers job to know what each one of their landlords desires and work hard to help the landlord achieve it. Here are some examples:
- Money! Some landlords care only about the getting the highest cash rent. It’s hard to “get creative” with these type of landlords.
- Continuity (keeping land in the family)
- Improvements (tile, ditching, irrigation, etc.)
- Agronomics (eg. an interest in their farmland raising great crops)
See below for a hypothetical before and after example of one of these letters.
“John, commodity prices are severely depressed. In order to come close to making money for the foreseeable future, I’d like to work with you on setting up a flex lease. The structure I propose is……..XXXX”
“As you know John, we treat all of our rented land as our own. It’s our goal keep making improvements to your land. See below information on a drainage project we have planned for your farm next year, at no direct cost to you or your family. We feel that this will improve the long-term value of this farm, specifically it will help the productivity on the wet NW part of the field.
[Drainage project details]
In addition, we’d like to work with you to tighten the spacing on the current tile in the field. Once again, we’d be willing to bear the cost of this but we’d like to talk with you further about how we can structure the lease to accommodate this value-added project. Does next week or the following week work for you to get together and discuss this further?”
In the second example, you’d then introduce a structure that would allow you to make these investments. Focus on the landlord’s benefit. Not the details of the structure or your benefits.
As I mentioned above, I realize the some landlords are solely interested in a top-of-market cash rent. Your options are limited with them. Even with these landlords, focus on getting to know them. You may be surprised to find out they have a couple secondary motivations that may allow you to work out mutually-beneficial deals.
Keep an eye out for more material we’re going to publish on this topic. We’re dedicated to helping farmers with the business of farming and there’s more to it then numbers!
Passionate about farm finances, software, and assets that produce cash flow (oil wells/farmland/rentals). U of MN grad.
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