Why return to farming? Because, Renkema says his CMA training told him it’s a great opportunity.
Certified management accountant and young farmer Gerald Renkema used his business skills to help him start farming four years ago. Today he manages his farm with his off-farm experience, and he plans for the future with the optimism of a farmer.
“I’m addicted to making spreadsheets and evaluating them,” Renkema sheepishly admits. “I kind of get lost in it.” He generates at least one different scenario a month — checking if changes will improve profitability or efficiency.
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In 2005, Renkema bought an ongoing operation near Kitchener, Ont. It took guts, determination and business know-how to secure the financing for the 125 acres, three barns and 20,000 units of broiler breeder quota (valued at roughly $150 per unit) for some 30,000 birds.
Those same strengths are making it pay.
Until then, Gerald and Kathy had good jobs at Manulife Financial and owned a small hobby farm. Although Renkema enjoyed his job managing half a dozen accountants, farming was in his blood.
After they had decided to take the plunge, Gerald remembers overhearing the talk around the water cooler at the office: “Did you hear about the guy in finance who’s quitting to start farming?”
Armed with a bachelor of commerce in management economics and the CMA designation he achieved while working, Renkema was ready to take on his own business.
“I could have had more specialized training in production management, but this way I can overlay my on-farm knowledge with the business management and put my two passions together,” Renkema says. “I don’t think I’ve been happier.”
Renkema has taken the templates he used at Manulife — get the right staff in place, be on top of finances and create efficiencies to improve profitability — to manage his own farm.
He also had on-farm experience and family assets to help him get started. Renkema was raised on a nearby layer operation that his brother oper-
ates today. His father continues to cash crop.
Renkema had to be proactive. Otherwise the farm would have carried on to the next generation without considering him. After all, he had a good job already. Ironically, that job experience — wealth management and accounting — helped him come up with a plan that would work for everyone.
Says Renkema: “I had a clear idea of what it needed to look like for me to start farming and I communicated that with my family.”
It took some extra creativity, compromise and courage from all (including their banker) to make it happen. Eventually, they settled on three separate businesses — his father Paul with the cropping, his brother Terence with the layers and Gerald expanding into the broiler breeder business. His father is a paid investor in the incorporated broiler breeder farm.
In a large corporate office, there’s an established hierarchy and system of accountability. Establishing that within a family can be difficult, especially during a transition when there’s no defined leader. Gerald credits his off-farm experience for giving him a clear business vision through this minefield and his father and brother for their patience and willingness to find a workable solution.
Although not under one corporation, the three enterprises are able to benefit from each other. They share equipment and labour and they deal with loaning agents as a three-operation team so they’re in a better negotiating position.
Renkema’s advice for others wanting to start farming: Don’t be afraid to take a risk but make sure you have a plan, and a backup plan.
With the World Trade talks always looming over Canada’s supply-managed industries and a young family, Renkema is thankful for his good education and off-farm experiences. Other employment possibilities allow him to feel more comfortable taking this huge financial leap.
Either Gerald or Kathy worked off-farm for the farm’s first three years so they didn’t have to take any personal draws off the business. This helped them get their feet squarely under the debt load. They estimate payback term for their broiler breeder quota to be about 10 years.
Renkema admits he’d rather be driving a tractor, but supply management allowed for guaranteed returns. He wanted to stay in the poultry business and thought there was more opportunity for his management skills in breeder egg production.
From a risk perspective, the stakes are higher, yet Renkema saw if he could manage better than average, he could
Renkema’s stategy is pure. “Seek out opportunities to be in demand. Go to where there’s change happening.”
drive efficiency and make more profit. There’s more upside opportunity in terms of management compared to layers or broilers. “It’s harder,” Renkema says. “There’s more management, more processes, more in-barn management.”
As a young farmer, Renkema says you need to position yourself to take advantage of management skills. The more generic you are, and the fewer levers you have to pull, the fewer management options you will have and the more vulnerable you will be in turmoil. By contrast, the more differentiated and management intensive you are, the more options you will have. “We need to position ourselves well,” Renkema says. “Find a niche and always be on the lookout for opportunities.”
Also be aware of the roles that timing and geography can play. This particular farm came up for sale near the Renkema’s home and close to their work, friends and parents. For a young family, that support system is priceless.
On the farm, Renkema tries to develop business relationships so that suppliers and buyers want to do business with him. These relationships are like a safety net, he says. If you have a problem and a good relationship with your suppliers, you’re more likely to work out a mutually beneficial solution.
“Seek out opportunities to be in demand,” says Renkema “Go to where there’s change happening.” The consolidation of farms and retirement of many farmers is creating an environment of opportunity, especially for established farm businesses.
Although they’ve just started farming, Gerald is already pondering the big succession questions: Can his two boys get along well enough to run a business together? Will they both want to be involved in agriculture, and what are their skills? Is it possible to create two or three units from one farm?
Originally, Renkema didn’t include succession in his business plan. He kept it simple with a clear workable cash flow plan.
Surprisingly, the accountant/farmer keeps his farm books as simple as possible, too. He finds Quickbooks sufficient for his farm. He can track net revenues by flock on this program just by allocating invoices as he inputs expenses, then does whole-farm analysis separately on spreadsheets.
With his feed company, he compares flock-over-flock income minus direct expenses against other producers’ returns.
Production-wise, Renkema finds internal benchmarking more effective than comparing industry production data. “If you do better against yourself each time, you know you’re moving forward.”
Production can also involve too many variables to make short-term benchmarking effective. One little thing can change the numbers two or three per cent and make you feel that you aren’t doing a good job, he says. However, if you know you’re in the ballpark with production, and your profitability is improving, then you know you’re doing a good job.
Some farmers are good at production but not so skilled at managing costs and don’t consider their time as an expense. Renkema isn’t one of them.
At this point in the development of the business, Renkema gets more return on his time by managing things like labour costs or calculating returns on technological investments.
“I’m managing on the financial cost end right now,” says Renkema “As I get more sophisticated, I’ll be looking more at the production end.”
Renkema doesn’t load in labour but considers it an overhead cost. He sets a target of what he wants to spend on labour in a year, and tracks hours to try to meet that target. Then he doesn’t go way over on labour. “I look more at return on my time and try to manage our labour better by adapting technology,” he says.
As they renovate the barns and farmyard layout, they can spend more time on higher-order activities. At first, they just needed to get the physical work completed but now they’ve shifted to making the whole farm run more efficiently.
In just four years, Renkema has cut back a third of his hired workforce, from three to two employees. By creating their own system to wash slats (made from an old square bale elevator for $2,000) they saved hundreds of hours of manual labour. Recently, they bought an egg packer to automate the most time-consuming job on the farm.
The last round of changes they made saved them 50 per cent of their labour costs with a payback of seven years. By evaluating each job and redesigning how the operation works within the whole farm, they can work more efficiently and drive the labour savings, says Renkema.
In retrospect, says Renkema he should have set up a line of credit on his bank account right away. Using that line of credit is not ideal but having it there eliminates your stress while you follow your cash flow plan.
Renkema misses the stimulation and social part of working in a large business with a group but revels in the everyday challenges of farming. To fill the “people” gap, he has volunteered on several industry boards.
Last year he worked on contract developing and running the Growing your Farm Profits program for Ontario Soil and Crop Improvement Association. It’s a
self-assessment workshop that helps farmers set goals and identify what areas of their business need attention. Renkema’s business management skills are now being used on many farms.
If your bank and suppliers aren’t organized and don’t understand how your cash flow operates and what your needs are for temporary or seasonal financing, it can create a lot of stress. This CMA farmer included a cash-flow plan right in his business plan, showing how he’d deal with the peaks and valleys of income and expenses.
Renkema credits his off-farm management experiences for giving him a whole-business approach. He loves analyzing what happens to profitability if he changes something.
On average, he spends about an hour a day in the office, first thing in the morning. As well as doing the farm books and creating profitability spreadsheets, Renkema stays on top of cash flow. “Cash flow is king,” he says. “Especially on new farms.” CG
Renkema’s stategy is pure. “Seek out opportunities to be in demand. Go to where there’s change happening.”
drive efficiency and make more profit. There’s more upside opportunity in terms of management compared to layers or broilers. “It’s harder,” Renkema says. “There’s more management, more processes, more in-barn management.”
As a young farmer, Renkema says you need to position yourself to take advantage of management skills. The more generic you are, and the fewer levers you have to pull, the fewer management options you will have and the more vulnerable you will be in turmoil. By contrast, the more differentiated and management intensive you are, the more options you will have. “We need to position ourselves well,” Renkema says. “Find a niche and always be on the lookout for opportunities.”
Also be aware of the roles that timing and geography can play. This particular farm came up for sale near the Renkema’s home and close to their work, friends and parents. For a young family, that support system is priceless.
On the farm, Renkema tries to develop business relationships so that suppliers and buyers want to do business with him. These relationships are like a safety net, he says. If you have a problem and a good relationship with your suppliers, you’re more likely to work out a mutually beneficial solution.
“Seek out opportunities to be in demand,” says Renkema “Go to where there’s change happening.” The consolidation of farms and retirement of many farmers is creating an environment of opportunity, especially for established farm businesses.
Although they’ve just started farming, Gerald is already pondering the big succession questions: Can his two boys get along well enough to run a business together? Will they both want to be involved in agriculture, and what are their skills? Is it possible to create two or three units from one farm?
Originally, Renkema didn’t include succession in his business plan. He kept it simple with a clear workable cash flow plan.
Surprisingly, the accountant/farmer keeps his farm books as simple as possible, too. He finds Quickbooks sufficient for his farm. He can track net revenues by flock on this program just by allocating invoices as he inputs expenses, then does whole-farm analysis separately on spreadsheets.
With his feed company, he compares flock-over-flock income minus direct expenses against other producers’ returns.
Production-wise, Renkema finds internal benchmarking more effective than comparing industry production data. “If you do better against yourself each time, you know you’re moving forward.”
Production can also involve too many variables to make short-term benchmarking effective. One little thing can change the numbers two or three per cent and make you feel that you aren’t doing a good job, he says. However, if you know you’re in the ballpark with production, and your profitability is improving, then you know you’re doing a good job.
Some farmers are good at production but not so skilled at managing costs and don’t consider their time as an expense. Renkema isn’t one of them.
At this point in the development of the business, Renkema gets more return on his time by managing things like labour costs or calculating returns on technological investments.
“I’m managing on the financial cost end right now,” says Renkema “As I get more sophisticated, I’ll be looking more at the production end.”
Renkema doesn’t load in labour but considers it an overhead cost. He sets a target of what he wants to spend on labour in a year, and tracks hours to try to meet that target. Then he doesn’t go way over on labour. “I look more at return on my time and try to manage our labour better by adapting technology,” he says.
As they renovate the barns and farmyard layout, they can spend more time on higher-order activities. At first, they just needed to get the physical work completed but now they’ve shifted to making the whole farm run more efficiently.
In just four years, Renkema has cut back a third of his hired workforce, from three to two employees. By creating their own system to wash slats (made from an old square bale elevator for $2,000) they saved hundreds of hours of manual labour. Recently, they bought an egg packer to automate the most time-consuming job on the farm.
The last round of changes they made saved them 50 per cent of their labour costs with a payback of seven years. By evaluating each job and redesigning how the operation works within the whole farm, they can work more efficiently and drive the labour savings, says Renkema.
In retrospect, says Renkema he should have set up a line of credit on his bank account right away. Using that line of credit is not ideal but having it there eliminates your stress while you follow your cash flow plan.
Renkema misses the stimulation and social part of working in a large business with a group but revels in the everyday challenges of farming. To fill the “people” gap, he has volunteered on several industry boards.
Last year he worked on contract developing and running the Growing your Farm Profits program for Ontario Soil and Crop Improvement Association. It’s a
self-assessment workshop that helps farmers set goals and identify what areas of their business need attention. Renkema’s business management skills are now being used on many farms.
If your bank and suppliers aren’t organized and don’t understand how your cash flow operates and what your needs are for temporary or seasonal financing, it can create a lot of stress. This CMA farmer included a cash-flow plan right in his business plan, showing how he’d deal with the peaks and valleys of income and expenses.
Renkema credits his off-farm management experiences for giving him a whole-business approach. He loves analyzing what happens to profitability if he changes something.
On average, he spends about an hour a day in the office, first thing in the morning. As well as doing the farm books and creating profitability spreadsheets, Renkema stays on top of cash flow. “Cash flow is king,” he says. “Especially on new farms.” CG
