Business strategies such as case studies can help young people launch successful farm careers, says session co-founder Lyndon Stewart
Lyndon Stewart doesn’t sugar-coat the message for the 40 farm hopefuls he’s talking to. “You’re entering into a business,” Stewart leads off, then follows with the punch. “Huge capital
requirements make for huge decisions.”
“You will need financial skills,” says Stewart, executive director of 4-H Ontario.
Stewart isn’t the only person who’s ever said those words, of course. A former banker, he and Jason French, general manager of the Ontario Holstein Branch, were exchanging just such sentiments a year ago when they started looking hard at the gap between the skills and insights that many farm hopefuls bring to their dreams, and the skills and insights that they’ll actually need to succeed.
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What Stewart and French decided to do next, however, is definitely different — and more positive — than the hand-wringing that too often is the only result when the talk turns to the outlook for young people on today’s farms.
The desire to dairy farm in particular is often formed in the fun and competitiveness of the 4-H show ring, Stewart and French agreed. In a way, it’s not such a bad place to start. Dairy farmers do need to know cows, but Stewart and French recognized that those skills don’t equip young entrepreneurs with all that it takes to build a career as a farmer today.
So the two set to work. Within a year, they had assembled an organizing committee, garnered funding and put together an agenda of industry leading guest speakers, plus an array of farm tours. Then in early May, they brought it to life, holding
Photo Credit: David Charlesworth
the first Ontario Dairy Youth Business Management School, complete with a case study competition.
For three days, about 40 participants between the ages of 18 to 25 gathered at the University of Guelph. Many of the participants were from herds milking fewer than 50 cows. Most of them loved showing. Almost all were frustrated with the entry price for dairy farming and the lack of available quota on the exchange. They were looking for ways to deal with succession, and they passionately wanted to farm.
Reality is humbling, however. Prior to last year’s quota cap in Ontario, the number of dairy farms was shrinking four per cent per year, and George MacNaughton, production and regulatory compliance division director for Dairy Farmers of Ontario, told the group to expect the price of milk to drop.
“Your parents have had it better than you will,” McNaughton said. Tariff walls are being breached by low world milk prices, and milk replacement products are entering Canadian grocery stores.
Even with these gloomy indicators, most of the participants were enthused, engaged and determined to start farming. At 25 years old, Gary Markus is already in the game. He’s a herdsman for a 250-cow operation and milks 40 cows at Beachville, Ont. with his twin brother Darryl, who is also a herdsman at another larger dairy farm.
Three years ago, Gary and Darryl created a business plan to start a separate operation from their parents 110-cow tie stall. For Gary, then, the Guelph workshop wasn’t about how to link showing cows with building a succession plan, but how to analyse the strengths and weaknesses of his current business strategy.
The main message of the three-day session is that dairy farming is a business first. “Quite frankly, only a small portion of the industry makes money showing cattle,” Gary agrees. “I enjoy showing but it’s not our gravy.”
Markus says the most valuable part of this business management school was getting to hear how other producers and young farmers deal with decision making. He annually reviews his financial statements but now will break down strengths and weaknesses more thoroughly.
“E Verybody Seems To Be Able To Set Aside Money For College. Why Wouldn’t You Use The Same Approach For Succession?”
— Gary Markus
Reality checks were what the conference boiled down to, and teaching how to make smart choices — from daily production, to working with family, to larger financial decisions. Markus took home several key messages:
#1 “ Surround yourself with good people.”
Part of being successful is managing the people portion of business. Each of the participants received a binder of reference material, including things like form letters for human resources such as a job application form, sample employment contracts and even a termination letter. Group discussions ranged over everything from incentives to time clocks.
The binder also contained a list of each other’s email addresses for future networking. The connections you make through groups like 4-H or college are invaluable, said keynote speaker Kevin MacLean, who farms near Kingston, Ont. “Surround yourself with positive people,” he told the group of young farmers. “… be gentle with your parents.”
In his early 40s, MacLean works with his parents and together they milk about 125 cows and grow crops on 720 acres. His story is laced with a good dose of reality and humour, which he says should be considered requirements for farming. “Above all, enjoy what you do.”
“Spend more time managing and less time doing,” MacLean says. “Maximizing milk is the number-one priority.”
Markus took home MacLean’s insight about needing a strong team to help you realize your goals. “Whether that be your vet or nutritionist, you have to trust them to make those decisions with you,” says Markus.
MacLean encouraged the group to take advantage of opportunities to see new things and learn from setbacks. In 2001, for instance, he had planned to build a new barn to expand the herd. The smell of ink was still on the blueprints when the bank they had dealt with for years refused the loan. It was a setback that turned into an opportunity to diversify and learn.
Instead, MacLean and his wife Jo-Ann built a log home and spa that she operates. That year, MacLean and his father, Barton, also tweaked their expansion plans after touring 55 barns. “The original design is nothing like what we ended up building,” he says.
The next year they found another lending institution, one that agreed with their vision.
Sometimes farming just takes patience. It took two years for the MacLeans to sort out their partnership agreement with the help of a farm-financial adviser. “It takes time to get all the issues out,” he says. He also recommends having a trusted qualified person help you create your succession plan.
#2 “T here are tons
of options.”
Many of the people at the conference were in the same situation as Markus with several possible successors who want to farm. Although it’s more complicated, he’s living proof that it’s not impossible to start dairy farming. “There are tons of options of which way to go,” says Markus.
Financial adviser Richard Cressman from New Hamburg, Ont., talked about family dynamics and succession. He spoke about how emotions can split up family businesses and he gave the group some ideas for succession with corporations.
With a corporation, the number of individuals can quickly grow as corporate owners get married, have children, nephews, nieces and grandchildren. Yet everyone has to get along. Cressman said, once you get into a corporation it can be difficult to stay on the same page with expanding lines of communication.
“Single succession is by far the easiest route to go,” concludes Markus.
Whether it’s a corporation, partnership or sole proprietorship, you’ve got to have a plan that makes you fiscally responsible and allows for change. Markus’s parents, Wendy and Clarence, set the goal of being able to help all their children start farming if they wanted to.
“Everybody seems to be able to set aside money for college,” says Markus. “Why wouldn’t you use the same approach for succession?”
Gary and his brother are set up as a separate partners in a sole proprietorship to allow them some flexibility in the future and to keep things simple. At some point
“E Verybody Seems To Be Able To Set Aside Money For College. Why Wouldn’t You Use The Same Approach For Succession?”
— Gary Markus
Reality checks were what the conference boiled down to, and teaching how to make smart choices — from daily production, to working with family, to larger financial decisions. Markus took home several key messages:
#1 “ Surround yourself with good people.”
Part of being successful is managing the people portion of business. Each of the participants received a binder of reference material, including things like form letters for human resources such as a job application form, sample employment contracts and even a termination letter. Group discussions ranged over everything from incentives to time clocks.
The binder also contained a list of each other’s email addresses for future networking. The connections you make through groups like 4-H or college are invaluable, said keynote speaker Kevin MacLean, who farms near Kingston, Ont. “Surround yourself with positive people,” he told the group of young farmers. “… be gentle with your parents.”
In his early 40s, MacLean works with his parents and together they milk about 125 cows and grow crops on 720 acres. His story is laced with a good dose of reality and humour, which he says should be considered requirements for farming. “Above all, enjoy what you do.”
“Spend more time managing and less time doing,” MacLean says. “Maximizing milk is the number-one priority.”
Markus took home MacLean’s insight about needing a strong team to help you realize your goals. “Whether that be your vet or nutritionist, you have to trust them to make those decisions with you,” says Markus.
MacLean encouraged the group to take advantage of opportunities to see new things and learn from setbacks. In 2001, for instance, he had planned to build a new barn to expand the herd. The smell of ink was still on the blueprints when the bank they had dealt with for years refused the loan. It was a setback that turned into an opportunity to diversify and learn.
Instead, MacLean and his wife Jo-Ann built a log home and spa that she operates. That year, MacLean and his father, Barton, also tweaked their expansion plans after touring 55 barns. “The original design is nothing like what we ended up building,” he says.
The next year they found another lending institution, one that agreed with their vision.
Sometimes farming just takes patience. It took two years for the MacLeans to sort out their partnership agreement with the help of a farm-financial adviser. “It takes time to get all the issues out,” he says. He also recommends having a trusted qualified person help you create your succession plan.
#2 “T here are tons
of options.”
Many of the people at the conference were in the same situation as Markus with several possible successors who want to farm. Although it’s more complicated, he’s living proof that it’s not impossible to start dairy farming. “There are tons of options of which way to go,” says Markus.
Financial adviser Richard Cressman from New Hamburg, Ont., talked about family dynamics and succession. He spoke about how emotions can split up family businesses and he gave the group some ideas for succession with corporations.
With a corporation, the number of individuals can quickly grow as corporate owners get married, have children, nephews, nieces and grandchildren. Yet everyone has to get along. Cressman said, once you get into a corporation it can be difficult to stay on the same page with expanding lines of communication.
“Single succession is by far the easiest route to go,” concludes Markus.
Whether it’s a corporation, partnership or sole proprietorship, you’ve got to have a plan that makes you fiscally responsible and allows for change. Markus’s parents, Wendy and Clarence, set the goal of being able to help all their children start farming if they wanted to.
“Everybody seems to be able to set aside money for college,” says Markus. “Why wouldn’t you use the same approach for succession?”
Gary and his brother are set up as a separate partners in a sole proprietorship to allow them some flexibility in the future and to keep things simple. At some point
in the future the brothers can easily go on their own. With some forward planning, their parents were able to gift them some money to start on their own. Another younger brother wants to farm too.
With such discussions still fresh in their minds, the Guelph group visited two dairy farms, including Philip and Peter Armstrong at Inglewood and Dwight and Karen Matson at Bolton, Ont., and breakout discussions focused on a broad cross-section of topics, including succession and expansion. The farmers shared their experiences and lessons from the on-farm school of hard work and stress and their plans.
#3 “ It never hurts to break
down your finances.”
Many of the speakers and break out sessions discussed ways to focus and to find indicators of what needs improving. The message was that you should benchmark your farm, not against the average, but against the top producers.
The other message was that there’s a large spread in profitability per unit across most of agriculture and between farms, and it isn’t dependent on scale. For many new entrants with limited capital, expansion possibilities are limited. Of the 4,000 dairy herds in Ontario, only 250 have more than 100 cows.
“Be better before bigger,” said Dave Rose, agrologist with the CIBC.
With banker’s math, Rose examined profitability on a kilogram of quota. First came a simple financial statement and then a milk cheque statement. Then Rose showed how to calculate earnings before interest, taxes, depreciation and amortization over the base productive capital of the farm, dairy quota. According to Rose, this calculation has a spread in Ontario between $2,000 to $4,000 per unit of quota.
“EBITDA is what’s left over at the end of the month,” says Rose. “That’ll quickly indicate to you the liquidity of business.”
It’s a banker’s quick check of financial health of the business but EBITDA may also show an opportunity. If you can improve that EBITDA per unit of quota or acre of land, there’s a lot of room to increase net earnings. Getting close to the $4,000 per unit level, for instance, may mean the farm can afford another wage without necessarily expanding.
One of the first things Markus is going to when he gets their books back from the accountant is to calculate EBITDA for last year. Will that change anything? No, but it may make him dig deeper into why he isn’t closer to $4,000. “Normally we just review spending closely,” he says. This will take it to the next level of thinking.
#4 “ Learn from what others
have done, good or bad.”
“The most valuable thing was getting to hear how other people have done things, whether that was right or wrong,” says Markus.
Knowing that there’s room to improve that overall benchmark can kick-start some deeper digging. A couple of the speakers talked about some computer decision-making software available that red-flags income issues or potential production problems.
in the future the brothers can easily go on their own. With some forward planning, their parents were able to gift them some money to start on their own. Another younger brother wants to farm too.
With such discussions still fresh in their minds, the Guelph group visited two dairy farms, including Philip and Peter Armstrong at Inglewood and Dwight and Karen Matson at Bolton, Ont., and breakout discussions focused on a broad cross-section of topics, including succession and expansion. The farmers shared their experiences and lessons from the on-farm school of hard work and stress and their plans.
#3 “ It never hurts to break
down your finances.”
Many of the speakers and break out sessions discussed ways to focus and to find indicators of what needs improving. The message was that you should benchmark your farm, not against the average, but against the top producers.
The other message was that there’s a large spread in profitability per unit across most of agriculture and between farms, and it isn’t dependent on scale. For many new entrants with limited capital, expansion possibilities are limited. Of the 4,000 dairy herds in Ontario, only 250 have more than 100 cows.
“Be better before bigger,” said Dave Rose, agrologist with the CIBC.
With banker’s math, Rose examined profitability on a kilogram of quota. First came a simple financial statement and then a milk cheque statement. Then Rose showed how to calculate earnings before interest, taxes, depreciation and amortization over the base productive capital of the farm, dairy quota. According to Rose, this calculation has a spread in Ontario between $2,000 to $4,000 per unit of quota.
“EBITDA is what’s left over at the end of the month,” says Rose. “That’ll quickly indicate to you the liquidity of business.”
It’s a banker’s quick check of financial health of the business but EBITDA may also show an opportunity. If you can improve that EBITDA per unit of quota or acre of land, there’s a lot of room to increase net earnings. Getting close to the $4,000 per unit level, for instance, may mean the farm can afford another wage without necessarily expanding.
One of the first things Markus is going to when he gets their books back from the accountant is to calculate EBITDA for last year. Will that change anything? No, but it may make him dig deeper into why he isn’t closer to $4,000. “Normally we just review spending closely,” he says. This will take it to the next level of thinking.
#4 “ Learn from what others
have done, good or bad.”
“The most valuable thing was getting to hear how other people have done things, whether that was right or wrong,” says Markus.
Knowing that there’s room to improve that overall benchmark can kick-start some deeper digging. A couple of the speakers talked about some computer decision-making software available that red-flags income issues or potential production problems.
Bill Grexton, from CanWest DHI, spoke about Profit Profiler, a financial and production benchmarking tool for dairy farmers. CanWest DHI is a nonprofit milk recording organization with a goal of providing profitable dairy management solutions to dairy producers across British Columbia, Alberta, Saskatchewan, Manitoba and Ontario.
At its heart, the Profit Profiler program is a spreadsheet that compares a farm to other dairy businesses of similar size, production level and geographic location. The benchmarks combine financial, labour, livestock production and cropping results to show strengths and opportunities in costs and production of forages, grains, milk and components, replacements and labour. Items such as forage cost per acre, cow cost per hectolitre of milk, or milk revenue per person are some of the 140 benchmarks.
Another part of the program involves projecting outcomes. For example, if quota is purchased, what will happen to net income? Profit Profiler costs $895 per year, including a consultant coming out to the farm for a couple of hours to help source and input the correct information and review the results. The DHI website is
“It would be good for anyone, even if you’re 40 or 50, to go through a Profit Profiler and pinpoint strengths and weaknesses,” says Markus.
#5 “ It’s so much easier
not to use paper.”
CanWest DHI is also the exclusive distributor for another software called Dairy Comp. Markus uses this program on 250-cow free-stall herd he manages and uses a mini version, Dairy Scout, on his smaller herd. At first they didn’t have a herd management software for the 40-cow herd.
“It’s so much easier when you can get away from the paper end of it,” says Markus. “It also helps other people (vet, feed rep) come in and troubleshoot for you.”
With herds under 100 cows, a single cow can have a big impact on your numbers until you get a few years of information, agrees Ben Loewith of Summitholm Holsteins near Ancaster, Ont. He operates a well-known 700-head dairy farm with his uncle David and father Carl, and swears by Dairy Comp. “I can’t imagine farming without a computer,” he told the Guelph group.
“You have to actively and systematically approach problems,” said Loewith. To do that effectively, you have to know your farm’s performance and then be able to benchmark against the best.”
Not only do you need enough data for decisions to be statistically accurate, the data must be recorded the same way by everyone. Sometimes that’s a challenge in multi-generational or employee managed farms.
Comprehensive, usable data enables you to make lead rather than lag decisions. For example, it’s one thing to say I know my cows and they have too many milk fever incidents. It’s another thing to know what’s causing the problem. Knowing age, lactation phase and calving dates may red-flag certain areas to solve.
Also, sometimes poor performance becomes the norm, said Loewith. With protocols in place to handle a problem, before you know it, you’re just doing that instead of asking why this happened.
“Take care of the little problems. That will flow into higher milk production per cow and then the whole farm’s finances improve,” Loewith said.
Loewith along with several other speakers at the business school referred to SMART decisions. The acronym stands for specific, measurable, agreed upon, realistic and time sensitive with deadlines.
“Good managers make just as many bad decisions as lower producing farmers,” says Loewith. “They just don’t live with their bad decisions.”
#6 “S et goals and priorities and stick to the overall business plan.”
With these priorities ringing through their ears, the Guelph participants were assigned groups and case studies to judge over the three days. On the final day, the teams made a presentation about the cases, reviewing the financial strengths and weaknesses of the sample farms and answering questions.
Markus and his team came second, answering one question differently than the winning group. The process of breaking down case studies of other people’s finances was interesting for Markus. “The case studies showed that business is the first thing you need to worry about,” he says.
The final take-home message was that to farm, you need to set goals and make decisions based on financial information and detailed data.
Back on the Markus brothers’ farm the overall goal is to pay down debt as fast as possible and grow by not taking anything out of the business. “You have to have a goal and business is foremost,” concludes Markus. To Stewart and French, those words mean a lesson has been learned. CG
Bill Grexton, from CanWest DHI, spoke about Profit Profiler, a financial and production benchmarking tool for dairy farmers. CanWest DHI is a nonprofit milk recording organization with a goal of providing profitable dairy management solutions to dairy producers across British Columbia, Alberta, Saskatchewan, Manitoba and Ontario.
At its heart, the Profit Profiler program is a spreadsheet that compares a farm to other dairy businesses of similar size, production level and geographic location. The benchmarks combine financial, labour, livestock production and cropping results to show strengths and opportunities in costs and production of forages, grains, milk and components, replacements and labour. Items such as forage cost per acre, cow cost per hectolitre of milk, or milk revenue per person are some of the 140 benchmarks.
Another part of the program involves projecting outcomes. For example, if quota is purchased, what will happen to net income? Profit Profiler costs $895 per year, including a consultant coming out to the farm for a couple of hours to help source and input the correct information and review the results. The DHI website is www.canwestdhi.com.
“It would be good for anyone, even if you’re 40 or 50, to go through a Profit Profiler and pinpoint strengths and weaknesses,” says Markus.
#5 “ It’s so much easier
not to use paper.”
CanWest DHI is also the exclusive distributor for another software called Dairy Comp. Markus uses this program on 250-cow free-stall herd he manages and uses a mini version, Dairy Scout, on his smaller herd. At first they didn’t have a herd management software for the 40-cow herd.
“It’s so much easier when you can get away from the paper end of it,” says Markus. “It also helps other people (vet, feed rep) come in and troubleshoot for you.”
With herds under 100 cows, a single cow can have a big impact on your numbers until you get a few years of information, agrees Ben Loewith of Summitholm Holsteins near Ancaster, Ont. He operates a well-known 700-head dairy farm with his uncle David and father Carl, and swears by Dairy Comp. “I can’t imagine farming without a computer,” he told the Guelph group.
“You have to actively and systematically approach problems,” said Loewith. To do that effectively, you have to know your farm’s performance and then be able to benchmark against the best.”
Not only do you need enough data for decisions to be statistically accurate, the data must be recorded the same way by everyone. Sometimes that’s a challenge in multi-generational or employee managed farms.
Comprehensive, usable data enables you to make lead rather than lag decisions. For example, it’s one thing to say I know my cows and they have too many milk fever incidents. It’s another thing to know what’s causing the problem. Knowing age, lactation phase and calving dates may red-flag certain areas to solve.
Also, sometimes poor performance becomes the norm, said Loewith. With protocols in place to handle a problem, before you know it, you’re just doing that instead of asking why this happened.
“Take care of the little problems. That will flow into higher milk production per cow and then the whole farm’s finances improve,” Loewith said.
Loewith along with several other speakers at the business school referred to SMART decisions. The acronym stands for specific, measurable, agreed upon, realistic and time sensitive with deadlines.
“Good managers make just as many bad decisions as lower producing farmers,” says Loewith. “They just don’t live with their bad decisions.”
#6 “S et goals and priorities and stick to the overall business plan.”
With these priorities ringing through their ears, the Guelph participants were assigned groups and case studies to judge over the three days. On the final day, the teams made a presentation about the cases, reviewing the financial strengths and weaknesses of the sample farms and answering questions.
Markus and his team came second, answering one question differently than the winning group. The process of breaking down case studies of other people’s finances was interesting for Markus. “The case studies showed that business is the first thing you need to worry about,” he says.
The final take-home message was that to farm, you need to set goals and make decisions based on financial information and detailed data.
Back on the Markus brothers’ farm the overall goal is to pay down debt as fast as possible and grow by not taking anything out of the business. “You have to have a goal and business is foremost,” concludes Markus. To Stewart and French, those words mean a lesson has been learned. CG
