Dollars and Sense Study
How can we increase the adoption of business management practices on Canada’s farms?
While we realize most farmers didn’t get into farming to be business managers, we know farm business management matters.
A ground-breaking 2015 study titled Dollars and Sense revealed the success of any farm enterprise, regardless of size, production sector, or location is directly related to the business management practices of the farm manager. According to this research, top farm managers are dedicated to continual learning, carefully monitor and use their financial data to make business decisions and are 30% more likely to consult with business advisors. They are 50% more likely to have and follow a formal business plan, monitor and use their costs of production to inform decisions, assess and manage their risks, and have a sound financial plan that includes budget goals. Farmers who adopt business management practices were proven to increase their profitability by up to 525%.
Click here to access the 2015 study.
2020 Dollars and Sense Study Update
It has been 5 years since the first Dollars and Sense study. In 2020, we wanted to take a deeper dive into understanding the barriers and drivers of adopting farm business management practices on Canada’s farms, and how we can help.
The Dollars and Sense Study Update surveyed over 700 farmers from across Canada, farm types and farm size.
Findings reveal the rate of adoption for the vast majority of business management practices has dropped over the past 5 years, including those practices that were found to have the greatest impact on farm financial performance in 2015.
While the ability to read and use Financial Statements continues to have the highest rate of adoption at 63%, this has declined significantly since 2015 (73%), and having a formal plan for human resource management continues to have the lowest adoption, now at 12% (compared to 20% in 2015).
The following table demonstrates how the adoption of farm business management practices has changed over the past 5 years:
|Having a clear vision and goals for the farm*||43%||31%|
|Communicating plans and the direction of the farm with key stakeholders||39%||39%|
|Having a written business plan that is reviewed and updated at least once per year*||26%||22%|
|Having a budget and plan for each enterprise within the farm that is reviewed regularly*||73%||63%|
|Calculating, reviewing, monitoring cost of production for benchmarking and decision-making||33%||33%|
|Having an in-depth understanding of financial statements to monitor progress*||50%||48%|
|Having a structured approach to financial planning to ensure sufficient capital to withstand changes to the business environment||51%||43%|
|Following markets closely and having a marketing plan to track pricing goals and targets||36%||35%|
|Having a formal risk management plan and procedures in place to assess and manage risk*||51%||42%|
|Having a collaborative relationship with suppliers and customers||32%||29%|
|Having a well-developed human resource management plan outlining responsibilities and compensation that is reviewed regularly to meet changing business needs||20%||12%|
|Having a form farm transition or succession plan that has been communicated to those involved in the farm business and is reviewed regularly when major changes occur||27%||26%|
|Using farm business advisors to help meet business objectives*||32%||23%|
|Actively seeking learning and skills development opportunities to meet the changing needs of the business*||49%||41%|
*Indicates the 7 practices of Canada’s top performing farms in 2015.
Study findings reveal the greatest barriers to implementing farm business practices are:
- Farmers feel the farm is succeeding without them
- Aging/retiring farmers feel it’s too late to benefit
- Farmers don’t have the time
- Farmers don’t know where to start
- Getting others on board with adopting more formal business practices
Lack of communication skills is the greatest barrier to engaging others in farm business management activities.
The greatest motivators to implementing farm business practices are:
- To increase profitability
- To manage risk
- To prepare for farm transfer/retirement
- To reduce stress and anxiety and improve quality of life
- To improve our family/farm team harmony
Farmers who regularly work with farm advisors, young farmers, female farm operators, farmers in Quebec, horticultural operations and larger farms are more likely to implement farm business management practices. With the exception of larger farms, these farmers are also most likely to access support programs and services offered by the Ministries of Agriculture.
This research reinforces the need for Farm Management Canada to continue to champion a better understanding and use of business management practices on Canada’s farms.
Following are the recommendations derived from our findings:
- Redefine the value of farm business management by redefining what success looks like. Success can be both business-focused and/or personal
- Create messages targeted to different segments – by age, gender and farm type that would better resonate with a specific group regarding the value and importance of each business management practice
- Investigate reasons behind Quebec’s higher adoption rates of these business management practices and how these lessons can be disseminated across other provinces
- Increase accessibility and availability of risk management and scenario planning tools that can help farmers prepare for the uncertainty they will face in the future or to manage the long-term impact the pandemic could have on farms.
- Champion the use of Farm Business Advisors
- Develop communication guides for understanding what farm business advisors can offer farmers
- Develop new resources for farmers including communication guides for various business management topics that farmers could reference to improve confidence in communicating about business management practices with family, employees and farm business advisors.
These research findings are critical for informing government policy, resource allocation, and how we can continue to support and promote the benefits of farm business management while addressing the barriers to adoption and implementation.
Click here to read the full report.
For more information contact:
Heather Watson, Executive Director
Farm Management Canada