“If we spend all of the time writing things on paper we would not be out farming.”
That’s a comment made by one of the 500 Ontario farmers who were recently asked if they had a written business plan and, if they didn’t, why not. In fact, 78 per cent of farmers contacted for the survey, conducted for the Agricultural Management Institute last year, said they didn’t have a written plan. When asked why, the biggest reason, by far, was “no need (or) interest.”
Heather and Greg Broughton have been on both sides of the business-planning fence. For nearly two decades, they farmed with no written business plan. Now, they can’t imagine being without one.
“Until you go through it, you don’t understand the value,” says Heather Broughton. “I just feel in better control of where we’re going. We farmed without one and we were doing a good job. But now I just feel much more confident in our decisions because we have a plan and a way to monitor when you go from A to B.”
Broughton and her husband farm 4,500 acres near Donalda, Alta. with Greg’s brother Charlie and his wife Rhonda. The couple also has a trucking business and had – in their pre-business plan days – a 70-cow herd.
“We learned a lot from Greg’s dad,” says Broughton, who joined the operation in 1985. “Even though he didn’t have a formal business plan, he knew it all in his head. And similarly for us, that didn’t really change until we went through the program.”
The program was CTEAM (Canadian Total Excellence In Agricultural Management), which is put on by the George Morris Centre and consists of four and a half-day modules conducted in four sessions over two winters at locations across the country. Broughton started it in 2004 and even though it was costly ($5,500 at that time), she sensed it would be worth it. Partly, that was because she did the bookkeeping for the farm, had taken some accounting courses, and was increasingly curious about business planning and what it might offer. But there was another factor.
“At that time, we were looking at our operation and beginning to ask questions. Do we keep doing what we have been doing? What should we be doing with the trucking? Can we do it all?”
Greg had started out with just a couple of quarter-sections and a few cows. He enjoyed raising cattle and was prepared to stick with them even when the BSE crisis devastated cattle prices. Then he started a small trucking operation, hauling grain and fertilizer, and even though Heather took over much of the feeding, it was getting to be too much.
The CTEAM program was bringing that into focus for Heather. After going through it on her own, she decided it would be even better if they took it together. The couple signed up for the next one and was doing something called a SWOT analysis (which stands for strengths, weaknesses, opportunities, and threats) when the lightbulb went on.
“When we did the SWOT analysis one of the obvious weaknesses was time,” she says. “We were trying to do three things – grain, cattle, and trucking. Not having the time we needed to do each of those things as well as we might was not only a weakness but maybe even a threat.”
Having made that admission, they “started seeing things in a different way,” says Broughton.
“So you start with that idea, ‘Maybe we’re too stretched’ and then you look at the financial numbers. Are we as profitable as we should be? Are we hurting ourselves because we lack economies of scale we might have if we were more focused? That’s when we decided to let go of the cattle. It was clear looking at our plan that it wasn’t fitting in and we could do better doing something else.”
After having gone 19 years with no formal plan, the Broughtons became planning enthusiasts. The couple went on to take another internationally regarded program, TEPAP (The Executive Program for Agricultural Producers) offered through Texas A&M University. As well, Heather is now an instructor in the Executive Development Program (a sister program to CTEAM aimed at executives in the agri-food industry) and the chair of the Agriculture & Food Council of Alberta, which promotes business development for companies in that province’s agri-food industry.
But she is emphatic that “we were like any other farmer out there.”
“It’s just we’ve taken advantage of the opportunity to take these courses,” says Broughton.
“I know that having a plan in your head works for some people. But when you put it down on paper, it makes you accountable. It also makes you really think about your farm. It’s all about asking yourself what you are striving for. What is it you want to achieve over the long term?”
The CTEAM program requires participants to develop a formal business plan, which includes a vision, mission statement, strategic intents, risk analysis, performance measures, and, in the case of the Broughtons, specific sections on production, marketing, HR management, and succession.
It’s not just the process – going through it with other farmers can be equally inspiring, says Broughton.
“It’s amazing watching people get that ah-ha moment and finding the direction, setting goals and saying, ‘OK, how are we going to get there?’” she says. “All of a sudden, they understand the power of writing down where you are, where you want to be, and having a plan to get there.”
Not surprisingly, participants tend to keep in touch and there are regular alumni reunions. At the first reunion, attendees, who were expected to have reviewed and updated their business plans, gave a report on how they are doing.
That requirement is an acknowledgement that even those who are firm believers in business planning discover, as Broughton puts it, “it’s very easy to drift.”
Even though the Broughtons sold their cattle herd in 2006, life is busy and finding time to stand back and look at the big picture isn’t easy.
“We try to review our business plan once a year,” she says. “But honestly, we really should be reviewing our strengths, weaknesses, and strategies more often than we do. So I have to plead guilty sometimes. You have to make a conscious effort to make sure you’re keeping them updated.”
But that’s how things go when you’re operating a farm, she notes, adding that the fear of “being stuck in the office” is likely the biggest hurdle for farmers who have considered writing a business plan but haven’t taken the plunge.
“And I wouldn’t want people to think you only have to do a business plan just because you’re planning to change or grow,” she says.
“That’s not the case because whether you’re planning for change or to stay the same, it gives you a vision and direction. Even if you’re planning to stay the same, it’s about finding a way to do that to the best of your ability.”
Their business plan has also made the couple very diligent about subjecting their operation to a yearly financial analysis. Once their accountant has made year-end adjustments to produce accrual statements, Broughton, who is the farm’s business manager, will employ a host of financial ratios in order to analyze performance. These operating efficiency ratios include gross margin/sales, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) divided by sales; and asset turnover (gross margin divided by assets).
Broughton says she expects more and more farmers will opt for written plans and, when they do, will “understand the power of writing down where you are, where you want to be, and having a plan to get there.”
However, she is quick to add that doesn’t mean they need to take the same route she and her husband did.
“Everyone is different and are going to approach things differently. For us, taking the program was key. But if you want to take a 15- or 20-page template off the Internet, you can do that, too. A business plan is very personal. It’s really about taking what you have and making it work for you.”
There are numerous business planning tools, programs, and courses tailored specifically for farmers. Under the Growing Forward program, provinces and territories offer a variety of business development programs. Program information can be found in the Programs and Services section at agr.gc.ca or by contacting your local ministry or department of agriculture.
Farm Management Canada has a resource book entitled Farm Business Planning: Understanding, Preparing & Using, which includes a CD with sample business plans and a business plan template. The book and CD cost $29 and can be found at the Resources and Publications section of fmc-gac.com