Lethbridge – Seven-month-old Scott Hofer sits gumming plastic rings while his parents, Julia and Michael, key numbers into a calculator and map a course for their family farm near Raymond, Alta.
The Hofers, along with Michael’s brother Paul Hofer Jr., his wife Lula and their teenaged and adult children, operate a 4,200-acre grain farm in the mixed agricultural community of southern Alberta.
The family recently attended an AgriSuccess workshop to learn about the nuts and bolts of strategic farm business plans. The event was one of many workshops conducted in Western Canada by Farm Credit Canada and the Canadian Farm Business Management Council.
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Paul Hofer Jr., 21 years older than Michael, said after attending the conference, that he better understands the processes used by banks and accountants to determine an operation’s financial stability, its marginsand its profitability.
“It gave us insight as to how they arrive at benchmarks,” said Hofer.
The Hofer family learned how to analyze the overall health of their farm by determining a series of ratios based on liabilities and debt load.
They examined liquidity (how well the business meets it financial obligations) and solvency (the amount of debt relative to the amount of owner capital invested.)
The family also explored profitability (how well the business generates revenue), financial efficiency (how well it uses its resources) and lifestyle.
Examining lifestyle is important in determining whether the farm can generate enough income to meet the family’s needs.
But for the Hofers, farm business plans are about more than merely number crunching.
Paul Hofer said their business plan must also incorporate intangibles such as helping neighbours in need, maintaining good family relationships and strong communication and providing adequate income for Hofer’s mother and sisters.
“Whatever it takes to maintain these, we would be prepared to do,” he said.
“If the farm has to become somethingcold and indifferent in order to succeed,I will exit farming.”
The Hofers’ smiles and laughter throughout the hours of tedious math-ematical calculations reinforced Paul’s comments about maintaining family harmony in a family business.
The Lethbridge workshop was the beginning of a long road that will next lead the Hofers to classes in farm succession planning this fall.
Paul, who has two sons interested in farming, wants to ensure the farm is viable and stable enough to support another family some day.
To plan for that, he has contacted an accounting firm to discuss how one son might receive a percentage of the farm’s equity or income in exchange for investingin equipment.
Such planning is critical to help families determine if the farm can support more members, he said.
They have also acquired more land and are looking at options like custom work and improving their marketing skills.
Looking back to his early days farming with his father in the 1970s, Hofer said those were good times with healthy financial returns. But little thought was given to long-term business plans and input costs.
Today’s farming environment has tight margins, and BSE has affected all aspects of agriculture, he noted.
“Today you need to know your day-to-day standing so you can take corrective action if things go wrong.”
Trina and Ron Wickstrom of Vulcan, Alta., share that view.
Business plans must be fluid and able to change with conditions, said the husband and wife team who also attended the farm business planning conference.
“We have so many parameters we cannot control and that changes what you do,” Trina said, citing the family’s move out of sheep farming into a grain operation in recent years.
She doubted many families have written farm plans and wondered how many refer to them once they’re in place.
Wickstrom suggested that few farmers are thinking about business plans because times are tough in the agricultural sector.
For some, the plan is to exit farming as soon as they can with as much as possible.
“In a lot of cases, people are just hanging on by their fingernails and don’t have the enthusiasm or the drive,” she said.
By contrast, the Wickstroms, now in their late 40s, are comfortable financially and are optimistic about their future on the four-section grain farm.
“We still love what we do and look forward to every spring,” she said. “It’s not a living, it’s a way of life.”
Wickstrom said she and her husband owe much of their good life to strong family support through the years and the opportunity to start farming with Ron’s parents.
Like the Hofers, the Wickstroms are planning a future in farming that will involve at least one of their two adult children.
Both children are actively involved in the farm. Their son is studying agriculture at Olds College and is keenly interested in returning to the family operation.
Wickstrom said creating business plans would increase communication among family members, help them to set goals and plan more effectively in a changing agricultural world.
Farming is big business, said Wickstrom, citing the multitude of programs available to farmers and the variety of complex application forms that go along with them.
Farmers must stay alert and keep track of things more than they did in their parents’ time, when the focus was on planting the seed in spring and harvesting the crop in the fall.
“(The purpose of planning) is trying to make the family realize the farm is big business and you have to encompass aspects of big business into your family farm plan,” Wickstrom said.
It is also important to seek help from outside the family, to seek new ideas and explore different ways of looking at things.
This will help determine if the farm is on the right track while creating a more productive exchange of information with lenders, lawyers and accountants.
“If you don’t keep learning, you might as well quit,” she said. “You have to have a desire to succeed. You have to want it to work.”
