“Farmers are always busy with their daily and seasonal tasks,” says Dean Dyck, farm business management specialist at the Alberta Ag-Info Centre. “When asked what their plan is for the next 10 years, they often say they haven’t had a chance to work on it yet. Whether the next generation is ready to take over, or you are in the prime of your farming career, you need to ask yourself what the farm business will look like 10 years from now.”
The first step in developing a strategy is to ask how long the business will exist. Will it exist for 5 more years or 25 more years? The planning horizon is often closely tied to the age of the operator.
“If you are young and recently entered farming, your planning horizon may be quite long. However, if you are 55, your planning horizon could be somewhat shorter depending on the direction of the farm operation,” he says.
The second step is to define where the business is going. “A younger operator may consider an aggressive growth strategy by adding one or more new enterprises or expanding the existing enterprises,” he explains. “Other alternatives to consider are staying the same size, changing the crop and/or livestock enterprises, or processing and marketing of farm products.”
He says that an older operator may consider these strategies depending on their ability to take on the risk. A higher priority may be retirement and the continuation of the farm business.
Questions that need to be asked include:
How long will I farm?
How long will I physically and mentally be able to continue?
If my desire is for the farm to carry on, who is the successor?
Do they want to take over the farm?
Am I grooming them to be the next farm manager?
Do I have a plan? If so, is it written and who knows about it?
If there is no successor, Dyck says to then ask yourself if you have an estate plan.
“Filing your income tax on a cash basis allows for the deferral of tax through the use of various strategies. But when you exit the business, this tax becomes due and payable, and the biggest beneficiary of your estate could be the Canada Revenue Agency. Do you want that? If you are in this category, maybe it is a good time to develop an exit strategy that will minimize the tax you will pay as you wind down your farm business and you transfer assets into your estate. Is it time to talk to your accountant about this?”
If you have a successor, determine the shared vision for the farm or ranch.
“The vision is the shared image of the family’s definition of success and what the family wants the business and legacy to be. Having a clear vision allows the family to set goals and address the dreams of the family. This is critical to the success of the family, the individuals and to the farm business.”
Dyck says that the discussion about the long-term strategic plan of the farm should start with a family meeting and asking some simple yet complex questions:
What do we desire for our family, the founders, the successors, and the non-farm members?
What will our family story and legacy be?
What do we want for the next generation and possibly future generations?
How will our family values influence our vision and where we want to go?
How will the farm business be part of our family vision?
Who is leading the farm business now and into the future, and how are they leading?
What are the opportunities and the strengths of our farm business?
“Although the answers to these questions may not be clear cut, they can provide a good base for discussion and the start of a plan. These answers will also create an awareness for that 10-year plan and a go forward framework on how the business will evolve. They will also provide clarity to all involved including those who no longer live on the farm.”