6 ways to spot a great business partner
Traditionally, in Canadian agriculture, it’s been relatively easy to find a potential partner for your next great farm business idea.
The complete list of candidates could generally be found around the dinner table. Family – your siblings, in-laws, parents and grown children – would have first crack at the opportunity. According to Dean Klippenstine, partner with MNP in Regina and director of primary producers, this dynamic is changing.
If your family members don’t suit your plans, cast your net a little wider.
Farms are now bigger, fewer family members are likely to be farming with you and not everyone has the skill set to make a 21st-century farm enterprise tick. “There’s still a lot of pressure to bring in family,” Klippenstine says, “but we’ve seen a number of examples of bringing in non-family members as partners.”
You’ve likely heard of business partnerships that started off well but in time became dysfunctional, unproductive and ultimately failed. In Klippenstine’s view, partner seekers need to be careful and systematic in choosing who to work with.
Many of the same guidelines that can help you find a worthwhile business partner will also be of value in securing promising employees with potential to take equity one day. In both cases, skills and attitude are paramount.
When family members go into business, there may be a host of competing financial, personal and emotional factors at play. When you consider a business partner from outside the family, you let all that go. “First, you need to make sure you want to be in a partnership,” Klippenstine says. “From there, you need to be clear why you’re doing it. It’s not for the sake of benevolence.”
Suppose you’re a 50-something farmer with a good land base and secure finances. At the same time, computers and marketing are not your strengths. As Klippenstine sees it, your ideal partner could be a 30-year-old who loves technology and wants an opportunity with upside.
Your young partner could be your ticket to increased revenue in the years ahead, even if you want to slow down a bit. “Target people who want to be farmers,” Klippenstine advises, “and who have youth, energy and spirit.”
Is there another industry that overcame its family-first tendencies and found a way to bring in fresh ideas and energy?
Klippenstine points to machinery dealerships. Beginning in the 1980s, some dealerships began to offer small stakes in the business to key people such as service managers. These small shareholders stayed loyal, added to their stake over time and today, very often own the place where they once punched a clock. “Owning a small share of the business established their commitment to the organization,” Klippenstine says.
“In agriculture, as the business has become more capital-intensive, the number of people in their twenties who can buy in has decreased. Sometimes, the best way to get people on board is to recognize they want some kind of an equity stake.”
The senior partner has land, equipment and capital. The junior partner has youth and enthusiasm. This type of partnership can work well for both parties. Still, Klippenstine cautions that partners needn’t be a generation apart. “One of our most successful non-family partnerships has only five years between them,” he explains. “One needed capital, and the other needed high-end labour. And it’s worked really well.”
You’re hunting for a business partner so your farm can grow, even if you cut back a bit. You’re looking for youth and commitment, but an older person could work in the right situation. Now, where do you find this person?
Klippenstine’s advice is to take your time and consider it carefully. Is there a neighbour who’s great at production, but seemingly short of capital? Is anyone you know coming home from university and weighing their options?
“It doesn’t have to be someone who’s actively farming,” he says. “It could be people who are already in our industry or are peripheral to our industry. Maybe you know a young agronomist in town. He or she could bring a lot to the business, depending on your skill set and what you’re looking for.”
Those disastrous business partnerships you hear about? Fact is, many of these were doomed from the start because the parties didn’t have their expectations aligned out of the gate.
Klippenstine recommends that prospective partners agree on who does what and how the money will work. Legal advice at this stage could save headaches later. “Business arrangements can vary substantially,” he notes. “My advice is, don’t ever bring in a partner with the idea you’ll be farming separately. Farm as one unit and divide up the returns however you negotiate.”
For now, many Canadian farmers will continue to look within the family for prospective partners for new business ventures. If your family members don’t suit your plans, however, cast your net a little wider. From Dean Klippenstine’s perspective, many of these new-style farming partnerships are working well, for both partners.
“It’s starting to happen and it’s something I think is going to be more common as agriculture in Canada continues to mature,” he says. “I think we’ll see more of this in the future, not less.”
Did you know that we host learning events across Canada on topics just like this? Find an event near you.