Farm business planning is key to successfully transferring the farm to the next generation. It also ensures the long-term health of the business and maintains family harmony.
But Rome was not built in a day and a good farm business plan isn’t either.
It is an evolving process to create a plan flexible enough to allow families to maintain viable operations, said business planner Douglas Stroh of Meyers Norris Penny
“The plan is a blueprint for success,” he said. “It’s not cast in stone.”
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He said most farmers are good at short-term planning but less enthusiastic about long range planning.
“But if you don’t plan, you don’t know what to do next,” said Stroh.
Dean Cross of Farm Credit Canada said a long-term plan can also head off unnecessary expenses.
He cited a scenario of a middle-aged farmer buying more land when neighbouring properties become available.
“Do you really want to work harder for the same amount of money,” he asked, noting it might take 10 to 15 years to see a return on that investment.
Studies done by Ipsos Reid for Farm Credit Canada in 2001 found Canadian farmers lagging behind the United States and Australia in business planning. The group interviewed 750 farmers from the three countries.
Only 16 percent had written business plans in Canada, compared to 25 percent in the United States and 29 percent in Australia.
Stroh said writing it down makes the family more accountable and more likely to implement it.
“The process will help you move things forward,” he said.
Planning can help farmers find out where they are now, where they want to be and how to get there, said Stroh, who conducted an AgriSuccess workshop on business plans in Lethbridge this winter.
Get organized, form a team and engage professional advisers as needed, but first take a hard look at the farm.
“You’ve got to step back and think about our business instead of spending so much time in it,” he said.
On the right track
Financial assessments, while dry, are necessary to get a good handle on the farm operation and its viability.
“You have to look at the foundation and kick the tires to make sure it’s worth going down the road,” said Stroh.
Write down the vision or mission statement, analyze where the business is now and what factors affect achieving that vision. Develop the strategy, identify objectives, set goals and lay out action plans.
Detail where the farm is headed one year and five to 10 years from today and carefully examine each family member’s visions for the operation.
Stroh said goals need to be specific, measurable, attainable, realistic and timed.
“In planning, you always have to have the end in mind,” Stroh said, citing selling, diversifying or passing it on to a child as possible options.
