How Farm Business Management Promotes a Strong, Innovative Agricultural Sector
Insight Learn more about how an understanding of business management has helped the agriculture industry in Canada achieve sustainable success.
Heather Watson is the Executive Director of Farm Management Canada (FMC). Heather’s passionate about education and is committed to enhancing efforts to encourage better business management practices for a sustainable and truly remarkable agriculture industry in Canada.
1. Why is farm business management so important?
In an ever-changing industry and increasingly competitive global environment, farm business management provides a foothold for farmers to confront change with confidence, take calculated risks, and seize opportunities.
A new study, “Dollars and Sense,” is the first to establish a measurable link between business management practices and farm financial success. The study reveals a recipe for success that begins with ongoing skills development, using professional business advisors, and planning. The study shows that farmers who adopt proactive business management practices can expect up to a 525 percent increase in profitability.
2. Trade and tax issues are hot topics right now in the sector. How can farmers protect their businesses amidst such uncertainty?
Agriculture is riddled with risk. It’s important to note, however, that not all risk is bad. With risk comes opportunity, especially when farmers are equipped with the proper skills, resources, and tools.
Business planning can unite the farm team around a vision for the future. The process involves assessing the external and internal environment of the business, developing a plan, implementation, monitoring, and evaluating performance. This is the best way for farmers to protect their businesses and to invest in what works.
3. What must farm business managers do to ensure their businesses are prepared for the transition to the next generation?
Transition planning must be done. It ensures there’s a process in place to evaluate the viability of a farm before transfer, and addresses the transfer of ownership, capital, management, and labour. Not having a transition plan may bring about something termed the succession effect: if a successor has not been identified or a transition plan laid out, farm owners tend to stop investing in the farm and to reduce operations. A farm transfer then becomes difficult, as the farm may not be viable enough for the next generation. Not planning for the future presents a number of serious risks.
Given the complexity of farm transition, professional support is recommended. From a personal perspective, it’s important to discuss who has a place in the future of the business. From a professional perspective, transition planning involves analyzing the current and future business environment, including optimal business structures, in addition to legal and financial advice, and possibly communication coaching and conflict resolution.
Farmers should seek out opportunities to learn about transition, as it’s an involved process. Farmers should also seek out a farm business advisor who can call in a multidisciplinary team of experts as needed.
4. What role does sound business management play in promoting agricultural innovation? Sustainable agriculture?
There’s an inherent connection between healthy people, a healthy planet, and a healthy economy. In the business world, we call this the triple bottom line, and it’s used in the context of assessing sustainability.
Only when there’s a careful balance between all three factors can we achieve true sustainability.
Taking this approach allows farmers to compare their current situation to desired outcomes for the best chance for long-term, sustainable success. Expanding market opportunities, seeking out and adopting innovative practices, managing risk, and environmental stewardship are only feasible when farms have the long-term capacity to succeed.
Investing in farm business management practices creates the foundation for lasting success.