A mile from the Ottawa River, the McGregor family has lived and farmed, and they have loved and built for five generations, to the point where their produce business has mushroomed to 15 stands, a pick-your-own business and four farmers’ markets.
Theirs is a story about embracing change, and about how, in the midst of all that change, to tackle the sometimes difficult challenges of succession planning.
That in turn means theirs is also a story of a deep commitment to family communication, and a story of tying it all together with business agreements.
“We are always looking at opportunities,” says Jim McGregor of Braeside, Ont., an hour up the valley from the nation’s capital. “We are ideas people.”
It’s that attitude that spurred his own succession back in 1977, when he and his wife Ann moved back to be near his parents’ 100-cow beef farm. That year their first child was born and the young family grew three acres of sweet corn.
By the 1980s, they were also growing strawberries and beans, selling wholesale and going to one farmers’ market.
Jim and Ann both worked off as well as on the farm, and they had their parents’ support, including from Jim’s mother, who worked in a legal office and always believed farming should be a business-like profession. So as early as 1979, they wrote formal work agreements, even when hiring other family members.
It soon became a way of doing things that would carry them through the next generational turnover relatively unscathed.
Currently, Jim and his sons Ian and Cameron have a three-way joint venture agreement, with each owning separate assets. A joint venture is an undertaking between parties to pool resources and share in profits, so that with a clear agreement like the McGregors’, the individuals own the assets and share the revenues that are left over after expenses.
A joint venture doesn’t require a separate business number, however. Nor does it own anything, or require the parties to file income tax together. And unlike in a legal partnership, the parties can’t act on behalf of each other.
The joint venture agreement is simply the guideline for the parties to work together over a specific time, usually with shorter renewable terms that you might see in other agreements.
Increasingly, joint ventures are also being seen as a great way to bring in the younger generation without creating legal problems if it doesn’t work out.
The other core belief that has continued guiding the McGregors through this generation is that it is important for the next generation to get an education and work away from home for a while before coming back to the farm.
Ian and his wife Deb both have agricultural degrees from Guelph, Cameron has a degree in criminology and his wife Mandy is a nurse working off the farm at Hospice Renfrew, and the McGregors’ daughter Sarah and her husband Randy Briscoe own and operate a dairy farm nearby.
Succession: Phase 1
Both Ian and Cameron worked off the farm for a year or two, with Ian coming home to farm in 2001, bringing with him a passion for production. After a few years of working on salary for the farm, Jim and Ian created a joint venture agreement so that each of them received half of the profits on the produce.
Also, Ian and Deb along with Jim and Ann bought Jim’s parents’ place, the home farm.
While making this transition, the three generations identified three objectives. First, the grandparents needed to be paid quickly. Second, they all wanted to minimize how much Ian and Deb needed to pay for the land because, like most beginning farmers, they were short on that kind of cash. Third, Jim and Ann wanted to retain some ownership.
Their solution was for Jim and Ian to split the purchase 50:50. Jim and Ann paid his parents for half while Ian and Deb paid for the other half slowly over a set term with no interest.
Again, although they hashed out the ideas, they had a lawyer write up a formal agreement, which included a provision giving Jim and Ian first right of refusal if the other one decided to or was forced to sell. For the farm to be able to afford to support two families, the McGregors knew they had to expand. “You can’t take two salaries out of a business that grosses only $100,000 a year,” says Jim. “Our major objective then was to increase gross sales.”
So they started going to more farmers’ markets, they expanded the pick-your-own strawberry business and added raspberries and asparagus. They also expanded their rental acres, and Ian led the way into grains and oilseeds, which proved useful rotation partners.
As long ago as the 1990s, British researcher Matt Lobley looked at surveys from around the world and consistently found a phenomenon he named “The Successor Effect.” Having a successor provides incentive for expansion and forward planning, he discovered, and these changes are often driven by the new ideas and vision that the younger generation brings back to the business.
At the McGregors’ farm, Ian and Cameron brought home the idea of “plasticulture,” using plastic to extend the growing season and keep the weed population in check. Today they use black plastic to cover rows of strawberries and tomatoes and have adopted drip tape irrigation. They plant beans and corn through clear plastic, and use row covers to protect early crops.
The boys also encouraged Jim to invest in agronomic advice. At first he was reluctant to go for the additional expense, but he became fully committed when he saw the benefits.
Ian and Cameron also brought home the business-altering idea of hiring offshore labour. It was a difficult decision at the time, says Jim, but a necessary one. Eight years ago they were depending solely on local help when in the middle of the season, one key employee family suddenly did not show up.
“We nearly killed ourselves working that summer… and we didn’t get all the work done,” says Jim.
Today, they hire 20 Jamaicans and 30 local students. Ian’s wife, Deb, schedules this labour force and does the farm’s marketing.
And Cameron makes three
In 2006 Cameron returned home to work with the business. McGregor’s Produce had grown and was selling at six farmers’ markets in addition to their successful stand at home. Once again, however, they knew they would have to expand to accommodate another family.
The next year, the McGregors started adding satellite stands in nearby towns, and today from mid-June to Labour Day, their crew of hired students drives their freshly picked produce to 15 locations throughout the Upper Ottawa Valley that sell directly to the consumer.
Cameron and Mandy bought the farmland surrounding Jim and Ann’s severed house. Again, Jim and Ann offered a break in the price and they hold the mortgage. Then last year, Cam and Mandy bought another farm where they live. It is being tile drained and they are planning to grow crops that will complement the current business.
Currently, McGregor’s Produce grows produce and crops on the two-thirds of their 1,000 owned and rented acres that are tillable.
In 2008, Cameron became an owner in McGregor’s Produce with the help of a new joint venture agreement, this time with 40 per cent of profits going to Ian, 20 per cent to Cameron and 40 per cent to Jim. In subsequent years, Cameron’s portion increased five per cent and Jim’s decreased five per cent until Jim reached 20 per cent.
Now, the written agreement will stay for the foreseeable future or until things change again.
As the next generation moved into ownership roles, sales increased dramatically, says Jim, who now is retired from the school system and spends a couple of months each winter in Florida.
Indeed, Jim now sees the arrangement as almost a magnet for opportunities, especially in the context of trusted, long-standing relationships in the community.
“The enthusiasm and energy of the younger generation combined with the experience, financial stability and confidence of the older generation have allowed us to do so well,” says Jim.
The transfer of management within the McGregor clan has been fluid and ongoing. “The three of us can do more by working together than if we each worked alone,” says Jim. “I can’t explain it, but there’s a synergy.”
Ian is the keen agrologist of the family while Cameron is a real people person who enjoys working with the staff, yet all three owners can do everything on the farm so they cover for each other.
The emphasis, though, is on mutual respect. “The boys are quite capable of making decisions,” says Jim. “They have more knowledge about farming than I do.”
That also means meetings. The McGregors have formal family business meetings including spouses, plus formal farm council meetings with all family members including Sarah and Randy, as well as less-formal farm management meetings where the day-to-day decisions are made by Ian, Cameron and Jim.
The management team also has periodic formal meetings where they review financial statements, dig into strategies, and look at ratios, cash flows and key costs in their operations.
Although they don’t always have the same ideas, they always are able to openly discuss each idea and agree on a decision in the end.
At least annually, the McGregors have a farm council meeting where they discuss bigger-picture decisions for the farm and family, such as risk management, wills, and medical coverage, and where they also celebrate achievements.
Len Davies, the farm financial adviser they hired three years ago to help them through the succession process, had the whole family take personality tests. This awareness has helped them communicate better. “The three of us are a lot alike but different,” says Jim. “Knowing our strengths and personality weaknesses can help the business and help each other by building on each others’ strengths.”
For the McGregors, having Davies at their formal meetings isn’t about keeping the peace, it’s about sourcing new ideas and tapping into his resources. “We discuss things thoroughly all right, but there’s never any shouting. That’s just not the way we operate,” says Jim.
In that spirit, the McGregors also have family business meetings several times a year which include the spouses. These meetings are for making more strategic decisions, such as creating a mission statement, deciding whether to go to a farmers’ market on Sunday or even whether to have the farm operating on Sundays, all to help maintain some family time.
Such discussions have shown Jim and Ann how committed their children are to family values, something they respect greatly. The younger generation wants to book time off to be with their family, whereas Jim says his generation thought they needed to stick close to home so they could be working all the time.
These meetings follow strict guidelines regarding frequency of meetings and who attends, and the family sets an agenda ahead of time and keeps minutes. For such meetings, the McGregors have a “no-children” allowed rule to ensure 100 per cent engagement from everyone.
Although sometimes it’s difficult to schedule these family business meetings because each family is so busy with three children, everyone knows how important it is to the business. “Talk face to face with all the players,” says Jim. “Spouses need to be a part of the business team, especially on the philosophical decisions.”
There WILL be disagreements
The reality is that you’re not going to agree all the time. In fact, says farm family communication adviser Richard Cressman, it’s actually important that you don’t all think alike.
Yet it’s essential that you learn to fight fair, says Cressman, based in New Hamburg, Ont. All discussions need to be transparent, respectful and confidential, and everyone needs to recognize, for instance, that nothing destroys trust like hearing from a neighbour what was talked about at a family meeting.
Cressman says adherence to the following principle may be the most important attribute of successful families: “Disagreements will happen. Someone may leave a meeting in a huff. That will happen from time to time. However, they’re all expected to come back to the next meeting willing to participate.”
There should be a clear distinction as to who has input into what discussions and decisions, yet everyone’s voice is important. “Cultivate an attitude that your meetings are an integral part of the future success of the business,” says Cressman.
And remember, if there’s stress and conflict in your family, Cressman says, it will almost inevitably have originated in a lack of effective communication at some point in the family system.
Communication, he says, is exactly that high value.