TAKING THE FIRST STEP

By Jeanine Moyer

IT’S ESTIMATED THAT 75 PER CENT OF FARMS ACROSS CANADA will change hands in the next 10 years. That prediction by Farm Management Canada means farm businesses should be making plans for succession and transition, or an exit. But are they prepared?

According to the Statistics Canada 2019 Farm Financial Survey, only one-quarter of Canadian farms have a written succession plan either completed or in progress.

“Without a plan, farm families risk losing their vision or legacy of passing the farm to the next generation,” explains Audree Morin, Business Advisor with Farm Credit Canada.

So, what does it take to make a succession plan? And what’s the best way to start?

Morin says the best advice she offers families is to start the succession process early, as soon as children –possibly the next farming generation – start working on the farm, whether they express an interest in taking over the farm or not. She says, “assigning jobs based on age and skillset can help every family member assess if they

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> Increases visits which is directly correlated to milk production

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> Follows your feed table according to production and / or days in milk

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As a FCC Business Advisor, Morin works with families in the early stages of farm succession or transition, helping them prepare to build a plan. Her services are available free of charge, offering consultations that can serve as a discovery phase for families to help organize thoughts, identify gaps, and find farm advisors to assist with the plan development.

“The transfer of ownership doesn’t have to be all or nothing, it can look different for every farm,” says Morin, explaining that a farm succession or transition is a process that takes time, open communication, and a desire to work toward a common goal.

To make the process a little less daunting, a farm succession can be broken into three phases – the transfer of labour, farm management responsibilities and ownership.

STEP 1 – TRANSFER LABOUR

Transferring labour can be as easy as involving the secondary generation in the day-to-day farm operations, testing to see if they can handle the physical labour, and changing up roles and responsibilities over time as skillsets develop and interest grows. Don Gordon, Region 5 DFO board member operates a multigenerational dairy farm in the Durham region and is in the early stages of succession planning with his son, Sam. Gordon says his board role has escalated this initial labour transition phase on his farm, providing his son more opportunities to step into the day-to-day farm operations when Gordon is away managing DFO board responsibilities. Gordon says that in his absence, his son has demonstrated enthusiasm and capabilities that are helping the succession plan move ahead faster than they had planned.

STEP 2 – TRANSFER MANAGEMENT

When it comes to transferring management, a solid farm business plan can make everyone’s job easier. Whether a farm is preparing for a transition or not, Morin stresses the importance of creating a business plan to help guide business decisions, establish long- and short-term goals, and responsibly manage finances and assets.

“Business plans aren’t just required to get a loan, they are also risk management tools like crop or life insurance, and have the power of fostering family unity or cohesiveness because people are working toward common goals,” says Morin. “Without a business plan, farm managers are at risk of making decisions that could impact or limit the succession to the next generation.”

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Morin suggests the transfer of farm management may go smoother with a solid business plan in place. She also recommends farm families engage outside resources and consultants for assistance, including accountants, lawyers, and financial advisors to help with long-term planning and decision-making.

“Create an environment that fosters critical thinking, knowledge sharing, and above all, open communications between generations,” suggests Morin. “This will give the junior generation the confidence and capabilities to step into the management role, knowing they have support, while helping the senior generation take a step back.”

STEP 3 – TRANSFER FARM OWNERSHIP

The final farm transition phase, the transfer of ownership, is often referred to as the “finish line”, or the ultimate goal every farm family member works toward. Morin reminds producers this final phase will look different for every family.

“Every operation is unique, and families need to focus on what works for their situation,” confirms Gordon, noting that even though his family farm is in transition, he doesn’t have a finish line or timeline in mind. “The most important thing for our family is that we’ve started the process with an idea of what we want to happen to support our family and farm legacy, and we’re all working together,” says Gordon.

Phases Of Farm Succession

To make it less daunting, break your farm succession into three phases:

• Transfer labour

• Transfer management

• Transfer farm ownership

Resources

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