When Stan MacEwen drives from the farm to his job as farm business consultant at the downtown Sasktoon accounting firm of Hergott Duval Stack LLP, the distance in terms of miles may stay the same, but the distance in mind-set is getting less and less. More farmers are spending more time on business management, using similar strategies to Hergott Duval Stack’s myriad of clients in other sectors.
MacEwen is past president of Saskatoon’s branch of the Canadian Association of Farm Advisers (CAFA) and has been a member of the organization since its founding. Below, he answers our questions about what he is learning from his farm clients. Is he describing you?
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1Farms are getting bigger. The dollars are getting bigger too. When you meet your farm clients and analyze their operations, is it like having a front-row seat on those trends?
The amount of change in the last five years has been huge. We see hardly any Dad and Mom operations farming for the lifestyle any more. They’re almost non-existent. The job has gotten too big for one or two people. In almost every case, there’s a son or daughter, or an employee who is integrated into the operation. Often there’s a partnership or a joint venture of some kind. Farming is getting much more complex, which means our clients’ needs are growing all the time.
2Is size of operation the biggest difference?
Size is a big part of it because when the dollars get that big, a number of things start to happen. When you get into the substantial lines of operating credit needed to keep these operations running, for example, the banks start demanding to see more detailed cash-flow projections, and to get more frequent reports. That all takes more sophisticated management systems. The partnerships are different too. More and more, they’re more highly structured. There’s a clear understanding and tracking of who contributes what, and there’s more likely to be a formal agreement that spells out how the partnership will operate and how it will be dissolved.
But the even bigger change — probably the biggest change of all — is that more farmers are managing their farms as businesses.
3How do you mean “managing their farms as businesses?” Isn’t every farm a business?
We’re helping more clients adopt a strategy where they draw a steady income from the farm. They get away from scenario where if the farm has a good year, they buy a new half-ton, and if it has a bad year, they eat macaroni all winter. Instead, it’s the farm that has a good or bad year. The farmer gets paid for the value he brings to the farm, and that value is more or less the same in good and in difficult years. As a strategy, this reduces the stress and creates realistic expectations for the entire family, and it also helps the farmers see themselves first and foremost as managers of businesses. It focuses their attention on what are the most important decisions they need to make, and what skills they have to have in order to make them.
4But isn’t there a wide range in the financial skills of your clients?
Everybody is learning, but one thing I’m always seeing is that it isn’t safe to make generalizations. We tend to think that young people are more likely to better financial managers, in part because they’re more familiar with computers. But that isn’t always true. We see a lot of older farmers who are right up to date with computer programs. Not only do they set up the computers in the combine, they set them up in the office too. I’ve been surprised by that. It has a lot more to do with personality than age. And it has to do with attitude. They do good work, and they expect me to do good work too.
5In terms of personality and attitude then, what do you look for? When you meet with a client, what makes you think, this person gets it?
The good ones are the ones that keep asking questions. They’re the ones who don’t stay stagnant. They’re always wanting to know, what do we do next? Is there anything new? How could I be doing things differently? That’s what we really look for in a client, because that’s a client that can get the most out of our advice. In part that’s because it means they probably have a pretty clear idea of their goal. But it’s also true that it’s one thing to set up a plan, but then you have to take it home and make it happen.
6So, you’re optimistic?
I am. There are many, many opportunities in agriculture, and the proportion of our total production that is being done by the farms that “get it” is steadily increasing. These are farms that know how to grow. They know where they’re going. We have more clients in their 40s telling us that they’re starting to think pretty seriously about where they’re going to find the person who is going to take over for the next generation and how they can start the process of transition. They’ve got a long-range outlook.
7So where do they want to go? Do today’s farms have a clear idea of what success looks like?
Today’s farmers are better at understanding the difference between wants and needs. They’re also more likely to put some serious thought into how to get a balance between them. For one guy, it might be a cabin at the lake with all of the toys. For him, being successful not only means having a successful farm, it means pulling the grandkids behind a boat. For another guy, being successful might mean setting up the farm so his kids and grandkids have the best possible chance to succeed. And of course, for a lot of our clients, it’s some combination of the two. The point is, they have a much clearer idea of what they want to get out of their career, and because they know what they want, they can plan how to get it.
8Are there farms you aren’t optimistic about?
The difficult cases we see maybe the most often are farms where Dad was successful, but he didn’t encourage son to go out and get an education or go and work somewhere else. Son always had a nice vehicle to drive and some money in his pocket, and never had to worry about how to make ends meet. He never had to learn what it takes to build something. Some of these farms are really struggling.
The old saying is that change is the only constant. I firmly believe that. To be succeed, everyone needs to be willing to change.
9For successful farms, what do you see as the big challenges?
Probably one of the biggest issues out there is how to build trust. More farmers are recognizing that there could be a lot of benefit in moving toward team management. That not only involves getting the most from other members of the farm, but from professionals too. Some farmers have been so independent, they don’t like to do anything that sounds like it’s giving up control. Others can be concerned about how much trust they should put in people they may not have worked with a lot. But in today’s world, no one can know it all, which means you need to find people you can trust, and then integrate them into your management team.
10So how do farmers know they’re working with the right accountant or farm adviser?
To a certain extent, you can look at fees. If you’re looking for something more than a person to do your taxes and plug the right number in the right spot, you tend to get what you pay for. That doesn’t mean that more expensive is always better, but in my experience, good advisers don’t negotiate a lot on fees. In my experience, too, it’s also good to insist on a person who knows agriculture. Farming is unique. It has its own programs and strategies, and it has its own language too. You need to be talk to your adviser and be sure you understand each other. I also think that good advisers know their limitations. They know when to recommend you bring in a lawyer or other professional. Then, talk to other farmers you respect. They don’t have to be your neighbours. In fact, it may be better if they aren’t. Find out what advice they’re getting. Does yours stack up?
Lets also not forget two of the most important questions. Does your adviser help you think clearly about your goals? And, because of the help you’re getting from your adviser, are you closer to achieving them?CG
