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Farm transition rut? How to turn roadblocks into building blocks

3.5 min read

If you’ve fallen into a farm transition rut, know there are ways out.

FCC Business Advisor Patti Durand and Maggie Van Camp, BDO National Agricultural Practice Development Leader spoke to farmers Lesley Kelly and Colin Penner about transforming transition roadblocks into building blocks at an FCC virtual event.

Stuck in silence

Communication wasn’t a strong suit in her family, Kelly admitted.

That became clear after her dad Garnet got transition planning of his Evergreen Woodcreek Farms in Saskatchewan underway.

“We thought we were good communicators, but that wasn’t the case when we started to sit down and talk about where we wanted the farm to go and what that looked like.”

Instead of getting stuck with conversations going nowhere, the family focused on improved conversations. Kelly, who now farms with her husband Matt and brother Derek, says some of the changes the family made to improve communications include:

  • Make a scheduled time to sit down and talk. It could be an hour once a week or 15 minutes each day but commit to it.

  • Establish an agenda. Determine what needs to be discussed.

  • Perform relationship maintenance repairs. “Just like how we fix equipment, the same goes for our relationships,” Kelly says. “It’s making those small fixes, tweaks and repairs that help maintain strong relationships.”

Too stressed out

Kelly says family members keep communication open and mental health in check by looking after stress levels together.

The family takes the time to share their stress levels, from a low of one to a high of ten. The specific times for sharing vary throughout the year, depending on what’s happening at the farm. In the quieter winter months, check-ins may be once a week, and during busier times like seeding or harvest, check-ins tend to be once a day.

It’s all about creating self-awareness and taking away the power of stress. By sharing and recognizing where everyone’s stress levels are and emphasizing team support and back-up during hectic and demanding times, stress loses its control.

Paralyzed by grief

Grief is strong enough to stall moving transition ahead, but some basic preparation can help keep family farm operations moving.

Sudden transition changes can come with an unexpected death on the farm. Van Camp lost her husband in a farm accident several years ago, right at a time when they were setting up a new will.

While grief is strong enough to stall moving transition ahead, some basic preparation can help keep family farm operations moving while the shock begins to ease.

Van Camp encourages farmers to have business basics in place and recommends families create a “Because I love you” list for survivors.

Organizing key data in one place provides peace of mind when family members and business partners need it most, and should include information about:

  • Passwords

  • Deeds

  • Names of professionals and other necessary contacts

  • Insurance policies

Squeezed out

Penner, who farms in southern Manitoba, points out that, there are some fundamental financial details to figure out before transitioning begins. Intended to verify whether the farm can pay the income of a second generation, doing these calculations and adjusting the farm business plan as needed will help keep the transition talks going.

  • Calculate the net farm income on an accrual basis. Itemize how much is earned, the costs, profit and income lost.

  • Determine the cost of earning $1. “Operations where it’s costing 50, 60, 70 cents to earn $1 – there’s a lot of room for the next generation to come in,” Penner says.

Additional ratios he reviews to diagnose the farm’s financial health:

  • Working capital. “You need to have cash to pay bills,” says Penner.

  • Debt service ratio. Are you able to pay for the debt you’ve got? He includes an examination of his loan payments, land rent and taxes.

Running into transition roadblocks can easily happen due to any number of circumstances. But, with a bit of preparation and the commitment to forge ahead, it’s possible to turn the roadblocks into building blocks.

Three transition questions to ask your lawyer:

  1. Is my will up to date? Do our wills reflect our true intentions and ownership structure?

  2. Let's discuss the agreements (verbal & written) that are in place on our farm and what should we consider adding/documenting?

  3. Do we have Power of Attorneys and Health Care Directives in place?

Article by: Richard Kamchen

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