With more than half of Canada’s farmers over the age of 55, it’s estimated that $50 billion worth of farmland will change hands in the next 10 to 15 years. What will it take for the next generation to be successful? How important is education? What skills will be essential? How can young people best prepare themselves for this new role?
We asked five experts from Canada and the U.S. to weigh in with their thoughts on these critical questions.
Education
There was a time when practical skills and hard work were enough to be a successful farmer. With increasing farm size and complexity, those days are gone.
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“There are successful business owners with very little education, and I believe that is still possible, but the law of averages says there are very few really exceptional people out there,” explains Richard Cressman, a farm business management coach in New Hamburg, Ont.
Gordon Colledge, a farm adviser in Lethbridge, Alta., agrees. While some children return to the farm with excellent practical skills such as welding or operating equipment, Colledge says that this isn’t enough. It’s essential that the successor also understand the business side of the farm, including relationship management, resolving conflict with siblings and in-laws, and being an all-around effective communicator, says Colledge.
“And he or she also needs to have a good grasp of the farm’s finances,” Colledge says. “If they wait until they meet with the accountant after the annual statement it may be too late.”
In a perfect world, Cressman favours a degree or diploma in business with a minor in communications as the ideal academic preparation for farming. With more people involved in the farm, being a good communicator is more important than ever, he explains.
“The successful family figures out how to build communication into the management structure,” Cressman says.
Dr. David Kohl, a professor at Virginia Tech University, agrees that communication skills have become increasingly important for farm owners. Farmers need to be able to work with staff and family internally, but also externally with bankers, regulators, consumers and others.
One of the values of education is learning to be a good student, says Colledge. Farmers will need to be lifelong learners so they can keep up to date on the fast-paced changes coming to agriculture. They need to be taking advantage of courses and conferences, he says.
Reg Shandro agrees. A mediator in Red Deer, Alta., Shandro says other professionals are expected to participate in a minimum of 30 or 40 hours of professional development every year to stay current. Why not farmers? he asks.
By attending conferences, young farmers can also develop a network of like-minded peers who can act as a resource and sounding board, adds John Anderson, a farm adviser with Collins Barrow WCM LLP in Kingston, Ont.
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Experience
All of the advisers we consulted agree that in an ideal world, the successor should work away from the farm for three to five years. While many parents are eager to have the kids show commitment by working on the home farm, the long-term benefits from the experience and maturity gained while working away from home are substantial. Certainly they outweigh the short-term labour benefits of having an extra pair of young hands working at home.
A Cornell University study showed succession was twice as likely to be successful, and profits were three to five times higher, when the successor worked away from the farm, says Kohl. “They need to learn to take orders from someone else,” he explains. “And parents will have more respect for them.”
Cressman agrees. “They need that time away in order for Mom and Dad to stop seeing their son or daughter as their little girl or boy.”
That time away gives the successor time to mature and to know if they really want to farm, adds Shandro. And they can make their mistakes using someone else’s money, he adds.
If the son or daughter says they want to farm but there is some doubt, rather than spending money expanding the operation to accommodate the child, have them work on another farm to see how they like it, suggests Shandro. “They can pick up skills and be mentored… the door is open for them to come back in five years.”
Some parents worry that if the child works elsewhere they won’t come back. Kohl’s response is to tell parents to concentrate on building up a really attractive business so the child wants to come back.
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Passion
A passion for farming goes a long way toward making a successful farm manager. It will motivate the younger generation to develop the necessary skills and fill in any knowledge gaps.
Taking over out of a sense of obligation doesn’t bode well for success. “If the kid only wants to farm out of a sense of guilt, it may be better to sell to someone else with a new vision,” argues Colledge.
The successor should be coming back to the farm with an offensive rather than defensive mindset, says Shandro. “If they are retreating to the farm for the lifestyle and because it’s a place of comfort, that’s not good.” He prefers to see people coming back to the farm because they are excited about the opportunities to grow the business.
Managing risk
Parents are wise to have an honest discussion with their offspring to determine their motivation for taking over the farm. Sometimes the child wants to work on the farm but is not interested in a management position, says Kohl. A neutral third party can help identify these situations.
One of the difficulties with the succession process is that when a son or daughter enters the business there is no job application process and no evaluation. “Just because someone has the same last name or DNA doesn’t mean they will be a good manager,” explains Anderson.
Both the successor and the parents should have job descriptions and performance reviews, adds Kohl.
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Parents often have difficulty evaluating the suitability of their progeny for taking over the farm. He finds they are often biased, either positively or negatively.
The founder’s ego can also get in the way, says Shandro. They may overestimate their own abilities at that age, or the criteria they consider to be important may be outdated. The founder may even feel threatened by the successor.
A trusted third-party adviser such as a banker or accountant may be able to make a more objective evaluation. They can also help resolve differences when the parents aren’t in agreement, says Kohl.
One of the most important steps in a succession plan is to assess the skills needed, identify any skills gaps and make an action plan for filling those gaps, says Anderson.
One area where kids are often lacking is their understanding of the farm finances. Parents tend to look after the farm finances and as a result the younger generation does not learn what they need to know, explains Anderson. This is one area where the parents may need to mentor the successor.
If the younger generation doesn’t have the necessary skills, you can hire these. Anderson gives the following example. There was a farmer who was ill with a terminal condition. While his son had been working in the farm business and was a good reliable worker, the father did not feel he had the necessary management skills or aptitude to run the farm business. The solution was to hire a farm manager to help the son with the decision-making on the farm.
When grooming the next generation, parents would be wise to avoid spoiling them. There are too many kids who were given new pickup trucks at 16, laments Shandro. “It’s very difficult to turn this around,” he says.
Farm succession is tricky business. It’s a very different world from when most parents began farming and there are no cookie-cutter templates. Being well prepared and maintaining open lines of communication will take some of the risk out of the process.
