Non-family farm transitions are certainly different than traditional family succession plans, and they definitely have their difficulties. But it turns out they aren’t impossible. In fact, non-family transitions are becoming much more common and much more successful. But they do require new strategies, and new ways of thinking.
How common are they? “A significant number of farmers we work with are coming from non-family farm backgrounds,” says Darcy Smith, manager of the B.C. Land Matching Program. “That seems to be the trend for two-thirds of new farmers.”
In this case, that may not be a surprise. The B.C. Land Matching Program’s mandate is to match these new farmers with retiring or other farmers who have land available for sale or rent. And, as anyone might guess, access to land can be a huge hurdle for any young farmer who doesn’t have family to give them a hand up.
The Land Matching Program, by the way, is delivered by Young Agrarians, a British Columbia-based, farmer-to-farmer educational resource network for new and young farmers, and this is another defining characteristic of this whole discussion. If you’re going to get involved in a non-family transition, whether as a farmer who wants all or part of your farm to survive you, or as a young farmer looking for a start, you’re going to be dealing with organizations and people you may never have heard of.
Young Agrarians is in the forefront. “Young Agrarians has been doing land access work since 2013, and through the B.C. Land Matching Program we began to dive into the non-family transition,” says Sara Dent, executive director of Young Agrarians. “We get a lot of people who are looking for support in that space, both in terms of needing information, and someone to facilitate conversations and help find matches.”
More recently, Young Agrarians has also developed the B.C. Transition Toolkit for Non-Family Farm Transfer, and it offers a Business Mentorship Network program that pairs starting farmers with experienced operators who assist them with their business development process.
“As much as possible we hire farmers to deliver YA programs so that we can leverage the knowledge people have from their own farming experience,” says Dent. “That’s what a lot of new farmers are missing if they don’t come from the family farm… they need to gain knowledge from other, more experienced farmers.”
A big commitment
A non-family transition takes commitment, and it is likely going to take time and patience, first to build up an understanding of everyone’s vision and goals, and second to figure out how to make them mutually achievable.
“It takes a lot of perseverance,” says Smith.
Again, that’s no surprise. Typically, one, the current farm owners have financial needs for their own retirement, which means they need to sell some land, AND, two, they want to leave something to their children, which means they need somehow to leverage the land, AND, three, they want to pass the land and farm onto a new farmer who can’t actually afford to buy it.
There aren’t any magical outcomes. “One of those things is going to need to be more important in the end,” Smith says. “Whichever it is, that’s okay… but it’s important to do the self-exploration and know how to prioritize the pieces of the vision and what is feasible.”
Smith says one of the first things that anyone thinking about a non-family farm transition needs to consider is taxation, because, while there are some favourable tax rules for family farm transitions, they don’t apply in a non-family situation.
“Any farmer considering a non-family transition should consult with an accountant before they start down the discovery path,” Smith says. “Each transition is going to be unique, and there will be tax implications. An accountant can advise people on what those will be for their situation, especially with the different transition models that are available.”
The next most important factors, in Smith’s mind, are relationships and communication.
“Communication is a business risk management strategy,” Smith says. “If everyone involved is committed and willing to do the work of communication and relationship building, that is promising for a transition. But if there is a barrier there, if that piece is not happening, then that is setting the stage for future conflict. People need to be on the same page about how they’ll communicate with each other, and what effective communication means to everybody right from the get go.”
Easier without the baggage
In developing their toolkit, Young Agrarians talked to dozens of seasoned farmers who were potentially looking at a transition to someone outside the family. When asked what differences the farmers saw between a non-family and a family transition, they all said that it is easier to transition outside the family because they aren’t dealing with all the baggage that comes from working through the personal dynamics of a family transition, which can often be tense and challenging.
But, while those transitioning the farm may feel the freedom of not having to deal with past family conflicts, or the preconceived expectations that family members often have, the new farmer lacks the shared understanding of the family’s values and the underlying beliefs that have guided the farm to that point.
“Both sides have work to do to build up the trust, the relationship and some shared values,” Smith says.
The Non-Family Transition Toolkit
“The Non-Family Transition Toolkit focuses on vision setting, communications and building an understanding together so that everyone has the tools and trust needed to work through a transition,” Smith says.
The toolkit offers a comprehensive, six-stage approach that covers: setting a vision, assessing feasibility, creating a plan, documenting the transfer, implementation and maintaining the transition. Each stage has worksheets with questions for both the new and transitioning farmers that help define and set goals, and guide them through their own unique transition process.
“When we work with people, it’s all about dialogue and conversation, so we encourage them to be curious and ask a lot of open-ended questions to learn more, and understand more deeply,” Smith says.
One of the toolkit’s foundation tools is the legacy letter.
“The legacy letter helps people understand and articulate what the farm means to them, and what they want their legacy to be,” Smith says. “It’s a guided exercise to help people put some of those thoughts onto paper, and it can be a great way of learning about each other if you’re writing a legacy letter to show someone in your succession plan, or perhaps learning about yourself. It also provides a jumping-off point for setting your vision.”
Get help for the hard conversations
There are going to be times when the transition needs some outside help, whether that’s from accountants, lawyers, consultants or other professionals to help sort out the technical details and, increasingly, to help people have the hard conversations.
“A lot of people don’t feel comfortable asking the hard questions,” Smith says. “It’s hard to ask your elder, ‘What happens if you die and how does that impact me?’ And it’s hard for farmers who are looking at bringing someone new in to say, ‘What happens if you have a baby and abandon my farm?’”
There’s a lot of vulnerability in asking questions, so it’s really helpful having someone who is neutral and can ask those awkward questions and then get deeper into the details, so they can lead the discussion and transform it into a truly fruitful series of conversations.
“We’ve got land matchers in B.C. that do that, and there are transition advisors and mediators across Canada with this skill set,” Smith says. “I would encourage people to engage those facilitators early on, which will support the transition in the long-term, and mean that you’re not later running into conflicts that you can’t resolve.”
Get it down on paper
A written business plan (i.e. something that a lot of farms don’t have) is especially important for a non-family transition.
At it’s most basic, a written plan will serve as a guide to navigate through the transition process, but will also help when people who are outside of the immediate transition relationship need to be involved, like lawyers, accountants and anyone else who needs to fully understand what the transition plan is.
“It’s one thing for a farm business to not have a written business plan and to be succeeding anyway because the farmer is just making it happen, but as soon as there are multiple people involved who need to stay on the same page for two, or five or 10 years, it’s important to write things down,” Smith says. “Our memories are fallible, and two people might have a conversation and agree on something, but in a few years the clarity around that agreement might not be the same, so writing things down can avoid potential misunderstandings in the future.”
Farm transition models
Today there is often no way that a new, non-family farmer with no existing equity can pay a mortgage with farm income. Land prices are too out of balance with returns.
Because of that, a number of new and creative models to transition farms to non-family members have emerged, and the one that people choose inevitably goes back to the vision-setting stage.
The Young Agrarians toolkit explores some of the different models (and provides some real-life case studies) for a non-family farm transition, such as a vendor take-back mortgage, co-operative ownership, and community ownership through trusts.
“The vision of both people, or all the people involved, is going to drive which of the pathways are chosen,” says Darcy Smith, manager of B.C.’s land matching program. “Within each pathway, there are a lot of different mechanisms, so if you’re wanting to transfer your land and farm to one individual, there are a bunch of ways to do that, whether that’s incorporating the farm or doing a private mortgage.
“If you want to go the co-operative route, you have to figure out how the co-op takes over the land. So, the vision drives which pathway, and the feasibility drives the mechanisms that you choose to make that pathway possible.”
Often, current farm owners will take a long-term repayment option, essentially setting themselves up as the financier, and allowing the incoming generation to pay them as they build their farm business, especially if both have a similar vision for the future of the farm, and the outgoing generation doesn’t have an immediate financial need to liquidate all the farm’s land and assets.
“We are just blown away by the creativity that farmers have shown in this space,” Smith says. “The determination, perseverance and passion that they have for supporting the next generation, and seeing their farm legacy continue, is inspiring.”
How to transfer knowledge
A new farmer who doesn’t have family ties to the farm is at a definite disadvantage over someone who grew up on the farm.
“The farmer who has been operating the farm for a long time has a wealth of knowledge about how the farm operates, and the lessons learned, and transferring that knowledge is one of the key challenges in any transition plan,” says Darcy Smith, manager of B.C.’s land matching program. “In family transitions, generally, someone who has grown up on the farm has absorbed a lot of that.”
The Young Agrarians toolkit has a section about how to transfer knowledge, and a good tool for gathering and documenting that knowledge is to develop Standard Operating Procedures (SOPs).
“It’s one example of a tool that can help capture and document the way the farm is run,” Smith says. “Also, if you have employees, or you’re certified organic, or in a number of other situations, SOPs will be valuable, and in some cases required, to operate a farm business.”
The SOPs can also be a great way to check in on how the transition plan is doing. “Every year, when all parties meet, they can use the SOPs to review the operations of the business,” Smith says. “The SOPs in that context do double-duty, and help everyone have a better, common understanding of the business, as well as the transition. It’s also helpful if employees are going to come into the business at any point to have everything documented and clear, so that you’re not relying on the knowledge in someone’s head to know how to do a task.”
Having a flexible plan
Although the toolkit lays out the non-family transition process in six stages, in reality no plan is going to be quite that linear, admits Smith, so it’s designed to be flexible and adaptable over the course of the transition, which can be gradual in many cases.
“Your implementation might start when you hire someone as an employee with the intention of cultivating them into a successor, and they may later become a farm manager, and gradually take on more responsibility on the farm, so that is part of the implementation,” Smith says. “In many cases, the full transition plan may not be in place even as implementation starts, so any transition plan needs to be a living, breathing thing that will evolve over time.”
But if the early groundwork for a non-family transition is done well, and a solid vision and plan is built, it will make the work at the other end a lot easier as the transition progresses and evolves, Smith says.
“It’s all about taking that vision-setting, understanding what needs to happen when, and following through on that planning and documenting,” she says. “It’s important to have regular check-ins, and set aside structured time to devote to the bigger picture, figuring out how you want to do that maintenance and monitoring, and making sure you are able to have healthy conversations on an ongoing basis.”
Says Smith: “The transition process is not always easy…. For those who are committed, stick to it, put the work in, on the farm, in the relationships, and in the paperwork; it can be rewarding.”
The future for Canadian farms
“A lot of new farms and startups are under a huge amount of pressure,” says Sara Dent, executive director of Young Agrarians, a farmer-to-farmer educational resource network for new and young farmers.
There are fewer than 25,000 young farmers (aged 35 and under) in Canada, and half of them are on leased land.
Will we have enough young farmers to take over from all the 60-year-olds who will soon be retiring?
The answer seems to be, at best, maybe. And we won’t unless more existing farms look for ways to support new farmers.
Young Agrarians, in addition to its B.C. Land Matching and Business Mentorship Network programs, has recently developed an on-farm apprenticeship program in regenerative agriculture, which has been operating in Alberta for the last few years, and which will be expanding to Saskatchewan and Manitoba for the 2021 season. The program will have 32 host farms across the Prairie provinces by 2022.
“People apply for the program, and we connect the apprentices with mentor farms, and help them set up agreements between the host farms and the farmers that are coming onboard, and make sure that the apprentices are getting a certain level of training and education when they’re on-farm,” Dent says. “The goal is to increase their skills and competencies for running and managing farms, whether they decide to be a farm employee, or go on and start their own farm. The apprenticeship is one of the ways to increase trained on-farm labour.”
Dent says Young Agrarians receives calls from all over Canada from people who would love to be able to access similar programs in their areas.
“We need to think about the fact that 1.7 per cent of the Canadian population farms, and nine per cent of those are 35 and younger,” says Dent. “We need to invest in farm renewal in Canada.”