Recently I was reading a book on economics. Whether we like it or not, the workings of the economy impact all of us in one way or another. The sentence that got me thinking was the domino effect on business services. 

In plain terms, if one business spends money with another business, then that person then has funds to spend elsewhere.

Farming is called primary industry for a reason, as it plays a pivotal role in society and the economy by growing food and fibre. 

There are lots of flow-on effects from farming, particularly in good years. Of course, the converse is true in poor seasons, when the cheque book is firmly deposited in the back pocket.

Machinery and vehicle dealerships are often beneficiaries after solid seasons. In recent times, this demand has been turbocharged by taxation incentives.

The domino effect may come back the other way when the farming business, sells or trades in the piece of machinery that has been fully depreciated, and finds out its now assessable income.

There’s a bit more to it than that, but that’s the simplified version. Machinery and vehicle dealers aren’t the only beneficiaries. There are plenty of other areas where funds are distributed, including the purchase of off-farm assets.

Which for most farming businesses makes succession a lot easier down the road.

This is where the maxim of compounding comes into play.

Quality assets held over the long-term will invariably go up in value.

As Albert Einstein once said, “compounding is the eighth wonder of the world”.

There is a never-ending source of places for people to park excess funds.

I’m pretty sure that Warren Buffet agrees, among others. Some people may donate funds to local community groups or other charities.

There is a never-ending source of places for people to park excess funds. Most farmers I know invest back in the business. It may be in the form of machinery, infrastructure, or inputs. All of which benefit the supplier of the goods too.

The domino effect is a gift that just keeps on giving, it is simply passed onto the next recipient, and so on. Understanding where the biggest bang for the farming businesses buck lies, is the challenge.

Profligacy has brought many an individual and business unstuck in the past.

Having a long-term plan of how to distribute excess funds is always a good idea.

Impulse purchases are rarely wise ones.

Most farmers I know are well versed in the art of delayed gratification, and this is good trait to have. An example of this came from a client conversation about gypsum applications.

The payoff isn’t immediate – it takes a while for the benefit to show up in yields, and improved soil health.

I think the agricultural sector sometimes loses sight of how much their output permeates through the economy. The domino effect is like a ripple in a pond, it starts with one action on-farm, and grows ever larger as it passes through more hands.