As Heather Watson introduced the theme of the 2021 Agricultural Excellence Conference – the Challenge of Change – she said there is an underutilized tool that can help farmers weather difficult times. A formal or written business plan is “a fundamental tool for any business and especially the farm, where there’s so much volatility and uncertainty,” said Watson, executive director of Farm Management Canada.
Writing a business plan creates a realistic picture of what is possible for the farm using internal and external data and information. “The process of creating it is perhaps even more valuable,” she said, noting it is a “tool to facilitate important discussions about the future of the farm and everyone’s role within it.”
The elements of a business plan include a business profile, marketing, operations, human resources and financial plans. Figuring out each of these areas can create opportunities for dialogue over risk assessment and transition planning. “We’re looking at taking a proactive approach to building the underlying capacity to weather any storm and seize every opportunity, positioning the farm for continued success,” Watson said. “A lot of folks would call that building resilience.”
However, less than a quarter of Canadian farmers have a formal business plan in place. Just over 40% of farmers believe they are succeeding without a business plan, but in another survey 77% of producers report they are stressed by the unpredictability of the agricultural sector. Watson shared this quote by Jim Rohn: “Your life does not get better by chance; it gets better by change.”
No matter which sector of agriculture you’re in, there are top and bottom producers. Demographics such as age, farm size or geography don’t seem to matter. Watson cites the key differential is producer attitudes towards farm business management and the practices they adopt. “The farmers who follow those tried-and-true business practices report increased profitability, confidence, peace of mind, and family and farm team harmony,” she said.
A written plan is one such practice that can serve a farm business in several ways.
1. Decision-making
“Change is all around us in farming, from weather to markets to transferring the farm,” Watson said. “While change can be difficult, it also provides significant opportunity if we’re in the right frame of mind and positioned to take advantage of new prospects.”
A business plan helps solidify where you are and where you want to go. With it, you can determine how you want to get there and if the decision at hand fits within your long-term goals and farm strategy.
It can help you decide if something is a good opportunity or not or if something is a risk or not, and how you’re going to respond.
“We tend to refer to this as strategic management – the planned use of your resources to reach your goals and objectives. Being mindful of obstacles that can come up and then being able to adjust your plans along the way, depending on what’s thrown at you, whether it’s a risk or an obstacle or an opportunity,” she said.
2. Resource needs
Looking at a business plan, you can assess the resources you have against the resources required to meet your current and future needs. Perhaps you need help with skills development, more access to capital or implementing certain environmental practices.
For human resources, you may need to grow the team or reassign roles. Maybe there’s a need for outside advisers and coaches. “As the farm manager, you can identify where you want to focus your energy and time and where you need others to support you,” Watson said.
3. Succession planning
A business plan should be a tool everyone on the farm can get behind. Can the next generation see themselves in the future of the farm as described in the plan?
It can also bridge the gap between what each generation thinks is best for the farm and thinking through the long-term implications of decisions being made today. “There’s just such a value in opening up that conversation, and the business plan is a phenomenal tool to do that,” she said.
4. Risk assessment
The risk assessment portion of a business plan can help you plan for the “what ifs” on the farm.
Questions posed by Watson were: What happens if I’m late on a payment? What happens if I can’t get my product to market or fulfill a contract? What happens if interest rates suddenly start to rise?
By looking at best- and worst-case scenarios, you can get a sense of your business thresholds, when a decision needs to be made and what that decision might need to be. “It’s kind of like having that safety net,” Watson said. “You know you’ve already built the ladder to get out of the window and you know when you’re going to need it, so you’re good and you can concentrate on farming, doing what you love and not worrying.”
5. Reduces stress
Of the farmers who follow a written business plan, 80% say it contributes significantly to their peace of mind. They can sleep at night because they know where they want to go and their place within the industry.
“They’ve looked at their best-case, worst-case, most likely scenarios, and they have a plan in place,” she said, “so really reducing that unpredictability that is the largest stressor of producers.”
Proactive planning and risk management are strategies to help farmers take on challenges they face and build the capacity to weather the storm better the next time. One of the best proactive measures is to have a written business plan.
“It’s kind of your be-all and end-all to keep your farm and your family healthy, wealthy and happy for generations to come,” Watson said.
