Seamless transfers

This family farm corporation in Ontario has transferred four times since the ’60s and recently diversified with the purchase of a local grain elevator. Here’s how the VanSickles have done it, and the lessons they’ve learned along the way

Near the Grand River south of Brantford, Shawn VanSickle pulls under the shade of a big oak tree at the end of the field. He stops for a moment to reflect about how in 1966 his grandfather did something groundbreaking for the time — incorporated the family farm.

Five decades later, G.H. VanSickle & Sons Ltd. now produces corn, wheat and soybeans on 2,000 to 3,000 acres and has grown an offshoot corporation with the purchase of an elevator.

The farm corporation has just completed its fourth business transition, and soon will be owned equally between four shareholders, including Shawn, his two sons, Jake and Josh, and his cousin, Peter.

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Having the farm set up in a corporation has made it easier to transfer between generations, says 58-year-old Shawn, who described their corporate strategy for this Country Guide article.

On this farm, cousins and grandchildren, children and grandfathers — everyone has worked together, and each additional shareholder is added with a corporate freeze and reissue of shares.

“This farm corporation is unique because it has had multiple transitions with multiple families and multiple generations,” VanSickle says. “… and it’s been pretty seamless.”

In their case, the farm corporation owns all the land, equipment, houses and farm vehicles, and the shareholders are each paid a base salary. Personal vehicles are the spouse’s or partner’s responsibility. Also, the shareholders rent the houses from the corporation and the company covers the cost of renovating the houses to a preset annual limit.

The VanSickles have structured the rules of transfer so they don’t have to sell any assets for anyone to retire. When shareholders decide it’s time to retire, they (or, if they pass, their estate) agree to receive their equity over 25 years.

This agreement means the farm doesn’t have to sell assets for a shareholder to retire. The family does not want to sabotage the productive capacity of the farm by selling off land to pay off retiring non-productive shareholders. “We’ve always known that if we didn’t grow, the next generation would have a harder time to keep the farm going,” says VanSickle.

The original farmstead was bought in 1864 near Onondaga, Ont. “We have an obligation to take care of the land and to continue to keep the farm growing and to diversify,” VanSickle says. “Now we are working with six generations of equity.”

With their age gaps, retirement has been spread into about 15-year increments and has become a somewhat normal part of their business, smoothly transferring shares and bringing in new people. It’s about the business continuing profitably for everyone and not a one-time estate event loaded with emotions and entitlement.

To do a transfer, generally shares are frozen in value at a specific time and new shares are issued. For succession, the preferred shares are allocated to the older generation and the new common or growth shares are given to the younger generation.

The original shareholders were Grandpa George and his two sons, Don and Bob. In 1984, the VanSickles did their first corporate freeze when George retired and Shawn joined. They operated like this until 1999 when Bob retired and Don’s son, Peter, came on board. Once again, they froze the share values and reissued them so the active shareholders had the growth shares and the retiring one had the preferred shares.

About another decade went by until the next transfer when Don retired and Josh joined the company. Then this year when Jake joined the corporation they froze the value and are splitting all the common shares quarterly between Shawn, Peter, Josh and Jake so growth is shared equally by the active shareholders. “We are all paid employees of the corporation and everyone gets an equal cut in the growth,” explains VanSickle.

Their elevator corporation gives new members an opportunity to gain experience before they join the main family board.
photo: David Weylie

Having the corporation own everything creates a shift in mentality so there’s less of an ownership hierarchy of power. “Legally, it’s structured in a manner that makes it fairly easy to do the transition of ownership,” says VanSickle. “Someone can come into the farm without having to have huge amounts of equity to buy in. They just have to be willing to put in the sweat equity.”

Management transfer

To add and train new successors in operations, the VanSickles’ farm takes them on as employees for five or six years to prove they’re committed to the farm and to the lifestyle.

All four partners can step in and take over pretty much any responsibility when needed. “We all have to pull on the rope. Everyone needs to show up to work hard every day,” says VanSickle.

By 2005 the urban pressure in the VanSickles’ part of southern Ontario was making land harder to find and buy. Yet Shawn and Peter were looking for ways to increase income to sustain their lifestyles, retire the older generation and bring in the next generation. An opportunity came up when the owners of a local independent elevator wanted to retire. It was a good fit for the farm, enabling them to expand their own grain handling, storage and drying capacities and increase gross revenues with a separate business.

It also turned out to be an excellent way for the next generation of VanSickles to train in a separate corporation. Josh, after attending Ridgetown College and then Olds College in Alberta, came home to the farm and started by working at their new elevator where Peter handled the logistics.

The elevator had a close working relationship with White Commercial, a brokerage company in Florida, and a few years ago they were offering a training course on marketing. The obvious choice was to send Josh to the course and he returned with new skill sets, a passion for commodity marketing and a mentoring relationship with folks at the brokerage company. “We had done some forward contracting on the farm in the past but he (Josh) takes it to another level. He’s able to hedge for us and knows how to hold a position in the market,” says VanSickle.

A couple of times a year, 33-year-old Josh continues to upgrade his training. Now he makes marketing a priority for the farm and for the other customers of the elevator. Two years ago he took over management of the elevator, although all four shareholders help as needed for both businesses. The elevator has a 700,000-bushel storage capacity and currently handles about a million bushels a year.

The other new generation VanSickle, 31-year-old Jake, came back to work on the farm about five years ago after getting his business degree at Brock University and working at several jobs in many different industries. He’s taking over the responsibility of the planting and inputs with guidance from the senior partners.

Although the next generation are better educated than the older generation, nothing beats practical application, says VanSickle. “In this business where you work with the land, you have to live it before you know it,” he says.

Everyone understands the terms upfront. The new generation comes with no equity and get responsibility for debt. But the growth potential is there.

Says VanSickle, “I feel it’s our responsibility to support the next generation, to give them a hand. After all, we’ve all had a hand up.”

Financial transfer

Although one person is responsible for specific tasks, they work and make larger management decisions collectively. All the shareholders have signing authority and can deal with the bank individually but the farm has an established culture where everyone has to be satisfied with the decisions. They all have to agree on the bigger decisions outside of their normal responsibilities.

The VanSickles don’t have formal scheduled meetings: Anyone can set a meeting at anytime on a certain topic and everyone will be there because they know how important it must be if a meeting was called. Shawn is currently acting as president, Jake is vice-president and Josh and Peter are secretary and treasurer, but the meetings are casual and driven by one specific need or a collective decision instead of designated power roles.

And they let the numbers drive the decisions, starting with cost of production and cash flow. Two or three times a year they generate cash flow statements and track their current position. The VanSickles always keep a close eye on cost of production per crop per acre and base their input, marketing and their crop insurance coverage decisions on those numbers. They sell incrementally and are always dealing with two crops at a time.

The next generation is immersed in this information and the process from the start.

“The hardest part is giving up control of management,” says VanSickle. “It’s not necessarily giving up control of the money.”

Like most new farmers, the younger generation has brought new ideas to the farm and VanSickle tries to encourage experimentation in small discrete areas of the farm. “Start small, start slow, let them make mistakes and learn from them,” he says.

He also admits that sometimes it’s hard to not compare today with experiences in the ’80s when they wired and welded for 10 years, learned restraint, and felt the deep lessons of cyclical markets and fickle weather.

“Sometimes you have to put up with old machinery,” VanSickle says. “You should not be afraid of debt. But you do need to understand how to manage it.”

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