Debts and loans

It is easy to convince yourself of a good income if you use all the maximised figures as used in example 1, whereas the reality is likely to be nearer example 3. The truth is that it does not take much bad luck (inexperience) to turn a small profit into a loss; it has happened before and it will happen again. If you have not banked on the highest profit, it will be possible to ride the loss and learn by your mistakes. Otherwise you may find the bank less helpful next time. Keeping the bank manager's confidence is very important; once lost it is very difficult to regain. It is not unknown for banks to foreclose on people who have a barn full of expensive stock because of lack of confidence. If you say you need an overdraft for a month to cover expenses until you sell some stock, in one month that stock must be sold for more than youowe.

In its simplest form your initial plan can be reduced to something similar to: Capital = Cost of property + Repairs + Setup and running cost + Housekeeping + Emergency fund.

Capital

It is difficult to discuss capital in general terms because everyone's financial situation is different. Some will sell a property and have enough to buy their smallholding for cash, set up their various enterprises and still have enough to invest. Strangely, this group are at greatest risk, having the most to lose as it is easy to dip into that extra capital for day-to-day living. The other effect of having surplus money (unless it is sufficient to provide a private income large enough to support the smallholding indefinitely) is to mask any losses incurred and to remove the necessity of making a profit from what you are doing.

So when calculating profit from sheep you could use figures anywhere from seven down to two ewes to the acre and the lowest is the most honest and hence the one you should use unless you can prove otherwise. To continue with the sheep briefly, you need to know your lambing percentage. It is easy to find figures approaching 200 per cent reared; for every ewe you own you would have two lambs to sell, but if 150 per cent is obtained regularly that is good. With poor to average grazing land and a hardy sheep such as the Welsh mountain 125 per cent is nearer the mark and is much easier to manage for the first few years.

From the above figures we will see that a wild variation in performance can be calculated from a particular acreage. If we work on a five acre block and the three levels of performance:

1. Pure fantasy (for the novice small holder)

7 ewes per acre lambing at 200%

7 x 2 * 5 = 70 lambs per year

2. Good average and something to aspire to

4 ewes per acre lambing at 150%

4 x 1.5 x 5 = 30 Iambs per year

3. The level like to be obtained at first

2 ewes per acre lambing at 125%

2 * 1.25 x 5 = 12.6 lambs per year

Assuming £30 per lamb overheads (which would be greatest on 1 and least on 3, thus decreasing apparent extra profit) this would give a gross income as follows:

1. £2100 per 5 acres - £420 per acre per annum

2.  £900 per 5 acres - £180 per acre per annum

3.  £375 per 5 acres - £75 per acre per annum

The last section made the smallholding sound very much like a business and that is exactly what it is. The chances are that you will be selling your home and using most or all of the resulting money to buy your smallholding. By so doing you must understand that you are putting the family home on the line. If you fail to make a go of it you must still find income from somewhere and well-paid jobs are scarce in rural areas. Remember this when you make your financial plan and do not delude yourself. Do not try to squeeze a paper profit from something that will not give one in reality. In some circumstances it maybe acceptable to add a little rose-coloured polish to the profit already calculated, but never turn a loss into a profit by choosing the figures which give the best results.

Typical of this are the figures quoted for the number of animals per acre of land. It is quite possible to find figures of seven ewes to the acre from some of the agricultural colleges around the country. Remember the floe km asters in charge of those college flocks are some of the most able people around and they also have some of the better improved pasture available, not to mention the correct buildings for inwintering.

Most people go into smallholding as enthusiastic amateurs so the skill required to handle high density flocks is not there; true it can be learnt, but mistakes can be expensive along the way More important is what the land can tolerate. Even well-drained improved land would be hard pressed to support more than four ewes to the acre during winter and most smallholdings consist of land anywhere from average down to bog and heathland. A more honest stock density for the enthusiastic amateur starting in smallholding would be nearer two ewes to the acre wintered out or three inwintered, but in wintering brings its own problems.