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Physical Assets [Farming
Posted on November 19, 2015 @ 06:36:00 AM by Paul Meagher

One of my goals at the end of this farm season is to add my old truck to the list of farm assets. This will be a truck that stays at the farm to be used for hauling stuff around and transporting farm workers around.

I'll be driving it back from the farm to my main residence to have the a clicking sound near the torque converter looked at in a transmission shop. I debated whether it was worth keeping my 1996 Mazda B3000 on the road after I was confronted with $1800 worth of repair bills (not even counting the transmission) but have opted to keep it on the road by finding ways to reduce the repair costs substantially through the help of a retired mechanic and an informal network of repair expertise.

That same retired mechanic also got my 1974 135 Massey Ferguson tractor working again last night after it sat outside for three months awaiting promised repairs that never happened. Again the informal network of expertise kicks in to save the day. With a cleaned up carberator and a repaired and timed distributor, new plugs, and new lines to them the tractor is running with alot more power than it has all season.

Having a dedicated truck on the farm opens up the possibility of having workers at the farm and that can take care of themselves and haul stuff around in my absense.

In farming a common goal is not just to grow a certain amount of crops or animals each year but to add to your asset base each year - a new tractor, a new piece of equipment, more land, etc...

One of the first physical assets any business can add to their company is a company vehicle. It makes alot of sense accounting wise and all maintenance costs can be expensed to the company. It seems stupid for me to own two vehicles for myself but that is the wrong way to think about it. The farm owns the truck now and I use it when I am able to come down and work it.

Often when you are investing in hard physical assets like a truck or a tractor the investment can be partially justified by the value of the material assets themselves. If you can't meet your cost of ownership then the financiers can repossess those assets.

When you invest in an idea or non-material asset it is often hard to repossess anything.

I do not want to downplay the importance of ideas, creativity, teams, and management as the driving force behind startups and businesses. I do, however, want to recognize the importance of building up a base of physical assets as an important component of growing a business. You need the equivalent of tractors and trucks to add to your physical asset base each period. The physical asset base helps to embody the value of your company. I don't think they have to be top-of-the-line assets. Stuff that gets the job done is sufficient - old trucks and tractors that work well.

Farm soil is also an important physical asset. Improving soil each year is more important to some farmers than buying a tractor that might be detrimental to their soil improvement goals. I still think these farmers are investing into growing their physical asset base by taking care of the soil. There is real value in good soil when proper soil web accounting is done. The financiers might not see it but those wanting to buy or lease the land in the future might be convinced to pay for that value.

Sometimes figuring out what counts as a "physical asset" can be tricky. Also, just because something is physical does not mean it is an asset. A broken down tractor is physical but is it an asset?

Here is my revived tractor (asset) with bush hog (asset) attached. Hood removed because we are still tuning. Custom square gas tank because it used to be an ice rink tractor running on propane before it was converted back to gas again. Previous owner was a welder. Issue around the manifold making it louder than it should be.

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