More farmers agree that the old saying has it about right: Failing to plan is planning to fail. It’s too easy to get off-course if you haven’t set your intentions and goals to paper. Besides, how do you track your success if you don’t have goals?
Having completed a succession plan that lays the groundwork for transitioning farm ownership from her parents, Sara and Chris Wood were keen to make their own plans for the future of the Mitchell, Ont. cash crop farm operation.
After obtaining a degree from the University of Guelph, Sara had worked off-farm for a few years at her mother’s insistence, and although Chris had grown up on a farm nearby (which he eventually purchased from his parents), for most of his growing-up years the land had been rented out.
Chris is a heavy equipment mechanic who also holds down an off-farm job maintaining heavy equipment at a gold mine in Northern Ontario. The company gives him a lot of time off in summer so he can farm, and the job helps pay the bills, but eventually he hopes to stay home full time. To that end the young couple are considering their options for expansion and diversification, such as setting up a processing business for their crops.
Last winter, Sara and her mother Deb, enrolled in the Guelph Agri-Food Management Institute’s (AMI) Advanced Farm Management Course for grain farmers. The course is designed to help farmers think strategically about their businesses, build a strong Management Action Plan, and provide practical management advice. Continuous learning is one of their core values, says Sara.
Chris also attended one of the sessions but his off-farm job prevented him from being able to participate more than that.
“It was a learning process of how we could take the business to the next level, and we wanted both generations to be a part of it,” says Sara. Although Sara’s mother is no longer involved in the day-to-day operations of the farm, she is still involved in the planning and acts as an adviser, says Sara.
Course instructor Rob Hannam likes to see multiple participants from one operation, as was the case with Sara and her mother. (AMI offers a reduced registration rate for additional team members.) While the course is designed to help individuals sharpen their individual financial and management skills, it also presents the opportunity to talk about business in a different setting with different people. That interaction between multiple members of the farm management team is “really positive,” says Hannam.
Sara agrees that being able to talk about the farm business with her peers was useful. She also found it helpful for her mother to attend so she has insight into the basis for the decisions Sara has been making since taking the course. “It wasn’t ‘I heard this. Let’s try it.’ She understood because she had heard it, too,” Sara explains.
A better understanding of the accountant’s financial statements was another benefit of taking the course, says Sara. By applying what she has learned in the course, she expects they will be able to improve their efficiency as well.
Helping farmers gain a better understanding of the farm’s financial health is an important part of the course, says Hannam. While farmers have always seen the value in tracking production numbers such as yield, pounds of gain per day, or milk per cow, more are also seeing value in being just as good at tracking their financials. “It might be just a few key financial ratios. Ask your banker which ones they are tracking and track those,” he says.
The best financial ratios to track will depend on the individual farm situation, says Hannam. Early in a farming career when debt is higher, a farmer might want to keep a closer eye on the debt/asset or debt/equity ratio. Later, profitability benchmarks such as the rate of return on farm equity (ROE) may be of more value.
These financial ratios can be tracked on a year-to-year basis or over five years, says Hannam, adding, “I like these financial ratios to be as top of mind as the production numbers.”
Communication between family members and business partners is also covered during the course. “Communication is a big part of transitioning a farm,” says Sara. The course has made it easier for them to take the emotion out of their business decisions, adds Chris.
Taking over the marketing for the farm has involved a big learning curve, says Sara, but negotiating that curve has been easier with the help of having a really good handle on cost of production and average field yields.
The Woods do a lot of forward contracting and after taking the course, Chris says they’d like to start buying options to limit risk. They evaluate their success by looking at their average selling price to determine if they could have done better, says Sara, and Chris adds, “There’s always going to be room for improvement.”
Sara missed the first class of the AMI course due to the birth of their first child but that didn’t stop her from attending the next four sessions with baby Logan in tow. The five-day course is spread out with a class every two or three weeks.
While acknowledging that the presence of young children could be disruptive in a class, in this case it worked well as the baby was very quiet and Sara was able to be fully engaged, says Hannam.
Hannam says spacing classes out over a couple of months gives participants time to think about the course content. It also gives them time to talk to their families, contact their accountants or look up their own financial records.
“By spreading it out, you learn and apply it as you go,” Hannam says.
By the end of the course, if participants do their homework, they will have developed a three-page business plan that covers the farm vision, core values, risks, financial goals, succession and marketing.
This is an easier way to write a business plan than trying to sit down and do it all at once, says Hannam. “People often tell me they can’t write a business plan but by doing it a bit at a time, it gets it out of your head and onto paper and allows you to communicate that with your family, employees and banker.”
And by having an action plan, farmers tell Hannam that when they look at the plan later on, they see they have actually been making progress toward those goals.
Farm business management resources across the country
(Prepared by Lois Harris, WordsWork)
Farm Management Canada
A national umbrella organization financed by the federal government and private partners dedicated to helping farmers know about and adopt good farm business management practices.
Agriculture and Agri-Food Canada
Federal government website that rounds up all the national farm business management programs and financial help they offer.
Almost all provincial governments have agri-business management resources.
Agri-Food Management Excellence
Offers agribusiness management courses tailored to farm operations. Based in Alberta, but courses are held across Canada.
Canadian Association of Farm Advisors (CAFA)
Listing of farm business advisers in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario.
Farm Credit Canada (FCC)
The Crown Corporation has a number of farm management advisory services and financial resources.
Colleges and Universities
- University of Lethbridge (Alberta)
- Brandon University (Manitoba)
- University of Saskatchewan (Saskatchewan)
- University of Guelph (Ontario)
- Fanshawe College (Ontario)
- Olds College (Alberta)
- Lakeland College (Alberta)
- Kwantlen Polytechnic University (British Columbia)
- McGill (Quebec)
- Dalhousie University (Nova Scotia)
- University of Manitoba (Manitoba
Business Score Card
The Agri-Food Management Institute offers the Business Score Card, a 30-minute online assessment tool, to help farmers measure their current management practices and set priorities. The score card covers leadership, marketing, finances, production, information systems, human resources, risks and succession planning.
Visit the Agri-Food Management Institute website for more information on courses and programs.