“I have adopted strategic business management because it allows me to enjoy my time on the tractor, and evenings with my wife.” Cedric MacLeod
As a young farmer, I owe so much to my mentors – my father has constantly inspired and encouraged me and I’ve learned a tremendous amount from numerous agricultural advisors.
But I’ve also gained a lot by interacting with my peers, particularly during the last three years while delivering a series of Best Management Practices workshops offered by the Canadian Young Farmers’ Forum, which is at the forefront in helping young farmers develop their professional skills.
This effort is greatly needed because the looming transfer of billions of dollars of farm assets in the coming decade. The sheer magnitude of this issue strikes fear into the hearts of many. Policy makers, lenders, and farm families need to address this issue and start having what succession expert Elaine Froese calls ‘courageous conversations.’
I believe there are four challenges to be faced. Young farmers must either become proficient in these areas, or hire someone who is and make them a part of day-to-day farm management.
First, we need to start managing by the numbers. Look at the land race raging in Western Canada – where farmers used to buy one or two quarters of land at a time, they’re now seeking to buy 10 or 12 in a shot. When you start to make moves of this size, you’re not only looking at financing land but an entire new line of equipment. What is the impact of a large expansion on your equity position today, and what does that mean when the ownership transfers to the next generation? Strategic business planning means having a clear vision of where you want to go and the resources required to get you there.
Joas and Lisa van Oord are great at this sort of strategic planning. This energetic farm couple from Springfield, N.B., operate a 50-cow milking herd in an efficient free-stall barn. Instead of building a bigger barn to milk more cows, they set out to get more milk out of their existing resources. They’re filling close to 70 kilograms of quota from milking 49 cows, and continue to invest time into developing more effective management and planning for the future, which will include robotic milking and automatic feeding systems. The van Oords are excellent at dividing ‘doing’ and ‘managing’ time so they don’t fall into the all-too-common trap of working in the business instead of on it.
Calculating the net return of every decision is the heart of business management. Young farmers have to know the long-term implications of present-day decisions. Keeping up with the neighbours or assuming bigger is better is a mistake – new barns, sleek tractors and an expansive land base have to make absolute long-term financial sense. Know your numbers intimately, develop a set of strategic business goals, and then manage by those goals.
Equity procurement and long-term ownership transfer
Young farmers can’t expect to get the majority of their equity from new entrant programs – we need programs that put more emphasis on encouraging the transfer and/or purchase of equity from the current generation of farmers over time. The combination of public equity supports and transfer of private equity between generations can work very nicely together, and both are essential. But we don’t talk about the long-term management of equity for the farm very well or often enough. Start talking about the importance of equity transfer to support the long-term viability of the farm, and you will find the equity issue becomes increasingly less challenging.
Effective communication is not only essential to strategic business planning and asset transfer but effective management. This doesn’t happen over coffee in the machine shed when you’re taking a break. You need to sit down at a regular time every week or two and have a structured conversation with your farm management partners. Make an agenda, talk about business, keep minutes, and have those honest and courageous conversations in a calm and respectful manner. When farmers say they don’t have time for that, I respond by saying you simply can’t afford NOT to take the time.
The importance of good communication doesn’t stop at the farm gate and young farmers really get this. They’ve embraced the advice of Texas A&M professor Danny Klinefelter who says, “Everyone needs an outside perspective from people they respect. Farm executives need to be part of a peer group where they are safe to throw out ideas, let down their guard, and share issues and concerns.”
If you haven’t got a peer group who you can share your strategic business goals with, build one. As Becky Perry, who dairies with her husband Dwayne and in-laws in Sussex, NB, commented after one workshop, “The greatest take-home from the workshop was to know that we are not the only ones dealing with these issues, and that we now have a network to lean on for support, encouragement and advice.”
I believe we need to view the neighbour across the line fence as a partner, not a competitor. Our competition is the rest of the world. We grow stronger as an industry when we support, learn from and encourage one another.
Data collection and management are increasingly important to effectively track the profitability of individual farm enterprises and agronomic performance of crops and livestock. The challenge for young farmers will be to consistently upgrade their understanding of data acquisition systems, and to adopt management practices that allow effective use of large volumes of data.
Jamie Christie from Trochu, Alta., explained at a recent CYFF workshop how he is seeking to use controlled equipment traffic strategies on his farm to minimize soil compaction, enhance soil health, and increase long-term yield potential. Putting a 60-foot air drill on the same exact path every year isn’t the toughest part – the technology exists. Collecting and managing the input and yield data is the big challenge. Not having to have hands on the wheel usually gives producers a quarter mile or more to review plans, keep records, review monitors, re-assess zone management strategies, ie. manage data. Remember that you can’t manage what you can’t measure, and while some farmers can remember dates, varieties, application rates, etc., the majority of us can’t, so write it down or make sure your monitoring system is collecting it for you.
The key is developing skills to manage it all. Leading North American farms routinely set aside 2 to 5% of gross revenue for research and development because they’ve learned it is the cornerstone of enhanced profitability. There’s a topic for your weekly farm meeting: What kind of innovative technologies and management practices could you develop if you spent 2 to 5% of gross revenue on R&D?
I wrote this column after a 15-hour day putting in the 2012 crop. I’ve got more money in the ground this year than I could have ever imagined – at times, it feels almost overwhelming. But then I recall my business plan and annual cashflow projections have it all laid out, and I have purchased crop insurance to cover my risks adequately. I have adopted strategic business management because it allows me to enjoy my time on the tractor, and evenings with my wife. What is it worth to have a little less stress in my life, and to actually enjoy my tractor time? It’s priceless.
In addition to his agricultural advisory firm, Cedric MacLeod also operates Local Valley Beef (www.localvalleybeef.ca), a grass-fed beef ranch in Centreville, N.B., that direct markets beef and chicken products to local consumers.