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Dream team

In Vector Grain, the Bruggencates and Sulzles are collaborating on a joint venture to make their longtime farming dreams a reality. It takes dedication and smarts, and loads of professional advice. But it’s paying off

Mike Sulzle had worked as Craig Shaw’s hired man for 16 years when Shaw approached him in 2015 with surprising news: 2016 would be his last year farming.

“Craig had always said I could take over when he quit farming one day, but it wasn’t serious,” says Sulzle.

“I didn’t see how I could do that.”

The obstacle was money, of course. As an outsider, Mike could work on a farm, he might even start leasing. In fact, he and Shaw had already been testing the boundaries, but becoming a full owner seemed, at best, a dream.

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“I’d been farming for 10 years as a sole proprietor, leasing Craig’s equipment from him, but we did it all together as part of Durango Farms,” Sulzle says. “How could non-related people get into farming unless they had a good chunk of change to start with?”

Shaw’s family had farmed on his land, four miles outside of Lacombe, Alta., for a century. His brother, Gary Shaw, ran a hog operation out of the same farmyard.

Now, both brothers were going to get out of farming in the same year. It came as a surprise to the Sulzles but, it turned out, it also presented a unique opportunity for another family.

Shaw called a meeting and asked Mike to come. And at that meeting was also Jay Bruggencate, a precision agriculture consultant and founder of Farmers Edge West who had been Shaw’s long-time agronomist.

Shaw had a proposal he wanted to float: Why shouldn’t Jay and Jennifer Bruggencate and Mike and Kelly Sulzle join forces and take over the farm?

“We hired a consultant, Reg Shandro at FarmAcist Advisory Services Inc., to help us figure out how it was going to work,” says Kelly Sulzle. “Someone suggested, ‘Should we try a joint venture?’ And then we asked, ‘What’s a joint venture?’ We’d never heard of anybody non-related doing this.”

But it was a chance neither family wanted to ignore.

“Jay had always wanted to farm full time,” says Jennifer. “We’ve always farmed on the side and had custom work done by Craig and Mike, and we thought, well, this is our opportunity, and opportunities like this don’t come often.”

For Kelly and Mike, the decision to collaborate with the Bruggencates was simple. “This is the life we’d always wanted to build for ourselves — it’s what we love. It’s how we were both raised and it’s what we know,” says Kelly.

Right from the start all four were in agreement about the breakdown of roles and responsibilities. Jay would manage agronomy and grain marketing while Mike would handle equipment management and logistics as well as day-to-day farm operations. Jennifer, who also runs a dance studio in Lacombe, would do the bookkeeping, and Kelly, who also works as a medical X-ray technologist in Red Deer, would assist Mike on the farm and maintain farm records.

They called their new joint venture Vector Grain.

“And then came the meetings, and the meetings, and the meetings,” laughs Kelly.

At first, Jay Bruggencate’s hope was to get the succession paperwork wrapped up in six months before the 2016 farming season began. It soon became clear that wasn’t going to happen.

“Craig had been farming for 40 years,” says Jen. “You don’t wrap that up in six months. We weren’t starting with nothing, but we were starting a new business and trying to make it advantageous to all of us, and the crop had to go in and come off, so we couldn’t meet during those times.”

Sometimes, not being family actually helps by taking the emotion out of their business decisions, the two couples agree.
photo: White Creek Ranch

The first year was rough, says Mike. “Spring planting couldn’t wait for us to get our paperwork lined up. We basically farmed that first spring without having a line of credit, with everyone just putting in what was needed to keep going.”

Craig Shaw made it possible by acting as a “silent partner,” says Kelly. Shaw leased his equipment to the four with no money down, while Gary Shaw sold his home to the Sulzles and allowed them to work out of the yard.

“Ours was a very unique, complicated situation. We were almost treated like family even though we weren’t. We were working out of a yard we didn’t own with equipment we didn’t own and putting in a very large grain crop — 3,500 acres,” says Mike. “Thankfully, in 2016 we had a very good crop. If we’d had a wreck the first year it would have been tough.”

Succession planning

With their first crop in the bins, the families started to put together a team that could help them sort out succession.

“Right off the bat we knew that we’d want to seek professional help,” says Jay. “I want to tip my hat to them because without their ideas and their strategies and advice it would have been extremely difficult and we would have questioned our path. But they gave us the confidence to move forward.”

Reg Shandro at FarmAcist helped the Bruggencates and Sulzles walk through roles and responsibilities for the new business, as well as with cash flow and financing, while Merle Good at GRS Consulting met with Craig, Mike and Jay to discuss tax planning. They also consulted a lawyer (Corey Gish) and their accountant at all stages of the process.

Jay and Jennifer decided to interview accountants to find one with the experience and willingness to take on the complexity of their joint venture, before they opted to work with Patrick Blair at Proverus.

“Who interviews accountants? Jay and Jennifer do,” says Kelly. “The accountants weren’t used to being interviewed, but I think some of them got a kick out of it.”

The pair interviewed five agriculture-focused accountants or accounting organizations based on word-of-mouth recommendations from other farmers. It was important for them to find an accountant with a succession plan, says Jay, to avoid getting “submerged” in an organization only to have to start over again if a key individual retired.

They asked who their key contact would be and who they’d be dealing with on a day-to-day basis. “We did not want to be dealing with a new intern every year,” says Jay.

They also asked about accounting software packages, rates, and what the accounting organization could offer Vector Grain from a business planning standpoint, not just tax planning.

“Proverus has a strong agriculture understanding and they ‘get’ the ag business,” says Jay. “They are local. And they answered our questions about succession in their own organization.

“Most importantly, we wanted not only an accountant but also someone who could be an advisor to our business — part of our team. We wanted someone who could help us strategize and plan on the front end, not just tell us how we ended up at the end of the year,” he says.

The Bruggencates also interviewed several banks before they found one willing to finance the project. They settled on ATB, which required crop insurance but — crucially — didn’t require land or equipment as collateral.

“Getting over that hurdle was huge,” says Mike. “The bank couldn’t classify any of these things as assets because we didn’t technically own anything.”

All of this meant a steady parade of meetings and massive amounts of paperwork — in one meeting, recalls Jennifer, the four signed their way through a 12-inch stack of paperwork.

“At first I was like, ‘Is this necessary?’ I’m not a meeting person, so these meetings were really painful for me at the beginning,” says Mike.

Both couples are now convinced the early planning was a crucial foundation for their business.

Currently, Vector Grain’s succession plan is about 75 per cent complete. Everything has taken more time than he expected, but Jay says he’s begun to realize that allowing time to evolve the plan has been beneficial.

“At the start I thought this was something we needed to put a deadline on, and be very rigid and structured, but we’ve let it evolve and progress and happen more naturally with the flow of the seasons and that’s been part of our success,” he says.

Honesty, trust and respect

A good deal of the venture’s success also has to do with interpersonal dynamics. The Bruggencates and Sulzles communicate and work together really well, a fact that Reg Shandro picked up on from the beginning.

“Honesty, trust and respect — that’s why this new project is working. These four have so much integrity,” says Shandro, a mediator and succession planning consultant who has worked in the Lacombe area for over a decade. “Craig Shaw is the same. They just trust each other, and don’t worry about every little nuance.”

Kelly believes the fact that the families are not related — to each other or to the Shaws — has also helped the process. “You hear a lot of stories about related people farming together and it doesn’t work, or it’s hard for Dad to step down and out, or the son doesn’t want to do it the same way he always did it,” she explains. “For us, this is business, it isn’t personal. Even though we’re friends, we all have that end goal that we want to be successful and we want the farm life, and we’re all on board to do what it takes to make that happen.”

Jennifer agrees. “We are unique in that we don’t bring in the emotions that a family succession can bring,” she says. “We also have natural separations because we aren’t family and aren’t in each others back pockets all the time.”

Both couples have kids; the Bruggencates have three — Janna (14), Gerrit (12), and Jacklyn (9) — and the Sulzles have two girls, Gillian (8), and Jade (7) — both girls can occasionally be found riding on the tractor in their princess dresses. Between school activities, 4-H and other pursuits (Janna has plans to turn the hog barn into an aquaponics farm), life is very busy for both families.

Jennifer and Kelly collaborate on bookkeeping for Vector Grain and also take turns picking up the slack on the farm, driving for parts and alternating evenings to bring harvest suppers out to the field.

There are also informal aspects to the collaboration: one “soft bene­fit” of joining forces has meant that the wider Sulzle and Bruggencate families, who have known each other a long time, can get involved on the farm. Both Jay’s father and Mike’s father help out with field work.

It’s been important to pay attention to the natural breakdown of roles and responsibilities, but also to allow flexibility and room for change, says Jay. “Not pushing or rushing it has allowed things to happen fluidly and naturally. But what we’ve done requires a very high level of trust on all parties,” he says.

Building a successful collaboration

There’s room in Vector Grain’s business plan for evolution of roles, as well as major life changes: divorce, accidents, death, and an exit strategy should the couples decide to end the partnership.

All of these “safety features” were discussed very early in the process as part of shareholder agreements.

“The consultants we worked with deal with these things on a day-to-day basis, where businesses are falling apart because people can’t get along. They helped us understand the importance of laying out roles and responsibilities, and building an exit plan right at the start. If things don’t go according to plan the exit plan is agreed upon,” says Jay.

The business is built on several levels. Because Vector Grain isn’t an incorporated business and doesn’t carry assets, it works as an operating entity: beneath its umbrella the Bruggencates and Sulzles each own their own companies. An entirely separate company called IronStone MC Ltd. owns the equipment purchased from Craig Shaw.

Mike Sulzle says it was Shandro’s detailed approach to strategy that helped the couples turn their expectations into writing.

“You need somebody who will ask those tough questions early on,” he says. “Otherwise, it’ll surface later on.”

Shandro says he believes the Vector Grain collaboration is counter-cultural. Out of thousands of case files, the Bruggencates and Sulzles represent his only successful collaborative non-related succession plan.

“A few years ago I was asked to do a webinar on non-family succession. I declined, because I’d never had one of these in my database. I had a couple of similar situations, where hired hands or neighbours wanted to take over a farm, but blood is thicker than water, and family equity usually trumps all in this type of story.”

It’s impossible to offer a bullet-list of ingredients that will make a non-family succession plan work, says Shandro, because it ultimately boils down to understanding the complexities of the farms and personalities involved. Succession never comes in a one-size-fits-all format — it must be built from the ground up to be successful.

For the Bruggencates and Sulzles, collaborating on Vector Grain has been worth the paperwork, because it means both families can do what they’ve always wanted to do: raise their families on the farm.

“The way I see it is that farms are getting bigger and equipment is so expensive. The guys who are doing it have been doing it forever. If you say, ‘Hey, let’s go farm,’ it’s not going to happen,” says Mike. “Maybe more farmers should join together.”

It’s a challenging mission, but for them, it’s worth it.

“Without taking a leap of faith we wouldn’t be where we are at the moment,” says Jen. “We are doing what we love.”

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