If there is one thing that is certain, it is that “you will exit your business or farm,” said Meg Ronson.
Nothing continues forever. The only question is, will the succession be sudden and fraught with challenges, as a result of illness or sudden death, or will it be planned and orderly?
Ronson was the keynote speaker at this year’s AgKnowledge Forum, held at The Club at Bond Head on Tuesday. She spoke about the importance of succession planning, defined as, “preparing the process and schedule for an inevitable farm or business ownership transition, ideally between an exiting owner and an incoming one.”
It is especially important in agriculture where, Ronson said, the average age of farmers is 55, there are more farmers over the age of 70 than under the age of 35, and only eight per cent of farming operations currently have a well-developed succession plan.
Ronson, succession specialist and analyst, warned that failure to prepare a plan for exiting a farming operation or entrepreneurial business can lead to premature sales, failed transitions, and loss of productivity and jobs. She urged owners to “harness the power of the succession plan to get ahead of the curve… It’s more than just a business plan. It’s a future plan.”
And, she noted, “every single succession plan is going to look a little different,” depending on the nature of the business, and the health, vision, hopes, aspirations and financial needs of the owner.
Is the owner interested in maintaining a family business and legacy? Is it a better option to sell to a third party? Set up an Employee Share Ownership Plan, or a co-operative?
The key is communication, she said. Never assume that family members are on the same page and want to take over a farm or business. Now is the time to hold those discussions.
Whatever the decision, there are five stages to creating a smooth transition in ownership, all of which take time, and money, Ronson said.
The first step is sale readiness and preparing the business for sale or transfer. It can take 12 to 24 months to put the books in order, get a professional valuation by a third party – vital “if you want to get fair value for your enterprise" and avoid “family squabbles," Ronson said – as well as identify internal issues, and create and execute an action plan to deal with those issues.
“Putting up a little money now will pay off when you go to sell,” she said.
Step two: Engage a buyer. This is the stage at which the owner needs to determine the nature of the transition – by inheritance, sale to a family member, or sale to a third party. It’s here that the online SuccessionMatching program can help find a buyer that is a good fit, in a process that can take six to 12 months.
Next steps include due diligence to ensure expectations, timelines and responsibilities are spelled out; financing; and, finally, the actual transition of transferring not only property but corporate knowledge, authority and relationships. The final steps can take as little as two months, to more than 60 months, she said.
The timeline shrinks if the plan is just to sell outright to a third party.
Ronson agreed with an audience member who said "it is easier splitting up money than splitting up land,” especially when there’s more than one potential heir.
Do not just assume a child is interested in taking over the farm or business, she warned. They may be in mid-career already, or just not interested – or the business may no longer be viable. And if the farm goes to one family member, what happens to the expectations and inheritance of the others?
“Have those tough discussions. Communication is always 100 per cent important,” Ronson said.
She suggested the next generation, because of their familiarity with social media and technology, will do well.
“Our young people are more equipped than ever before because they have that (social media) database,” she said. “They should be very effective when they’re ready to take over.”
The afternoon session was filled with local examples of multi-generational agribusinesses that are thriving, through innovation and diversification, such as the Beattie farm near Alliston, where a fourth-generation potato farmer not only solved a problem of waste, but created a new industry.
Kenny Beattie was growing about 809 hectares of potatoes for potato chip companies, but had to “grade out” potatoes that were not acceptable to the processors - too big, too small, too many ‘eyes,’ or green.
“We used to ship that to cattle, as feed, and that was costing us money,” said his wife Liz Beattie. Then, Kenny suggested distilling the potatoes to make traditional vodka. Sceptical, Liz accompanied him to PEI in 2013 to check out a vodka distillery, and said she came back thinking, “This is something we can do.”
The result was Beattie’s Distillers. After some initial bumps – in 2016, the company’s potato vodka had to be recalled from 220 LCBO outlets after there was an issue with alcohol content – Beattie’s took off.
The problem was traced to the co-packer. The Beatties built their own 743 squar metre distillery, and by the end of the year were in 300 LCBO stores, quickly becoming the No. 1 Ontario super premium vodka. In 2018, they were chosen World’s Best Vodka in the World Spirit Competition in Chicago.
It’s all about innovation, quality, and marketing, said Liz. Beattie’s Distillers now produce not only potato vodka, but potato gin, poitin, “sweet potato vodka," and a new potato whiskey, along with limited-edition seasonal specialties like strawberry vodka and cranberry-blood orange gin.
Marketing has been key, especially “mouth marketing,” or tastings. “We want to make sure people are liking our products before they buy them,” she said.
The distillery was a gamble and a huge investment, but family and friends helped to raise the more than $3 million needed – “no small potatoes,” said Liz. The regular farming operation continues, but now there’s no waste. The mash left over from the distilling process is used as cattle feed, or a soil amendment.
Gwillimdale Farms in Bradford West Gwillimbury is another family farm that has embraced innovation.
John Hambly, fourth generation farmer, said his success was based on three principles: “diversification, value-added and sustainability.”
Hambly and wife Christina, now joined by a fifth generation (their three children) have taken the farm from dairy and grain, to a major producer of carrots, onions, potatoes, parsnips and beets, in rotation with corn and soy.
In 2007, they launched their own in-house packing line, rather than sell to an outside packer, and now maintain a transport fleet for delivery across Ontario. They have partnerships with farmers not only locally, but in Mexico and California, to ensure a year-round supply of produce.
The farm is fully mechanized and automated, and a new refrigerated and computerized storage facility and vegetable storage facility “has been very successful,” Hambly said. “All the new technology – I can control that through my cellphone. I can control that through my computer.”
In 2014, Gwillimdale Farms took another audacious step, purchasing 283 hectares of muck soil in northern Ontario, 470 kilometres north of BWG.
“Around here, the price of property and the different lands are very expensive,” Hambly said. Not only are northern land costs reasonable, “it’s a better growing season than down here for some of the cooler crops.”
It’s an investment in the future, that includes plans for a packing line in the north.
“We have three children, and they’re all part of the family business,” said Christina Hambly, “but they have to know what the future is.”
Harrison Farms is also looking for new opportunities.
Dennis Harrison, fourth generation farmer, has always been interested in diversification. Since taking over the farm in 1988, he introduced edible beans, built grain elevators, and looked at intensive livestock farming – at one time raising 1,000 hogs in a less-than-successful venture.
“I don’t ever look at them as failures. The things we did got us to where we are today,” he told the forum. He farmed approximately about 809 owned and leased hectares in the Bradford area.
The farm’s biggest success has been in raising natural, GMO-free, antibiotic and hormone free livestock - lambs, pigs, cattle and pasture-fed poultry.
“That has been a great success story for us,” said Denise Harrison, through their Dingo Farms farm store, retail and farmers’ market sales, and online meat sales.
Now, the Harrisons and their five children have closed Dingo Farms after 10 years, and they are turning in a new direction.
“The common theme we see on the farm is diversification,” said daughter Brittany, part of the next generation of farmers. “We’re never bound to one thing… We’re refocusing and trying to grow our own business plan.”
Harrison Farms has been limited by high land prices in the Bradford area, and the uncertainties of being located near an expanding urban area. The solution was to buy land elsewhere.
“We chose to go northeast" to Renfrew County near Cobden, said Dennis, purchasing existing farms from farmers who don’t have children interested in agriculture.
“The Ottawa valley is a beautiful area for farming. There is a yield drag, but there’s also a price drag on property,” he said, adding that the investment is “for the kids. It’s very important to me that they understand the magnitude of what it is we are doing, and that they want to be there… When it gets bigger and stronger, it’s still a family farm – but you’ve got to pay attention to the business as well. There’s some tough stuff that needs to be talked about.”
The final example was Sheldon Creek Dairy, a value-added operation launched by John and Bonnie den Haan on their Haanview Farm near Loretto in 2012, to sell whole milk and milk products.
Marianne den Haan left a teaching career to return and help her parents run the dairy - not only providing a quality product, but educating the public, and putting a face to farming.
Succession planning is a reality at Sheldon Creek Dairy, where John and Bonnie have made retirement plans. There was a cost to the process, Marianne said, requiring a “good consultant, good lawyer and good accountant” to deal with issues that included employees, livestock, and debt.
Families need to have that discussion about the future of agri-business.
“It’s too late to talk about it when you’re dead,” den Haan noted wryly. “You either invest in this and make this your passion” – or it passes into other hands. “You have to decide. These people aren’t just your family, they’re people you get to work with, every day.”
There is a need to invest in the future.
“Debt is actually good – you’re investing in your business,” Marianne said, describing a new $1.2 million fully-automated milking barn built recently to house 120 cows. “If you don’t reinvest in your business, you’re probably not going to be around very long. You have to go into debt, but you have to know how you’re going to control that debt.”
“It’s amazing what you can do when the family ... talks about it," she concluded. "Today’s the day you’re going to make the decision on how you’re going to keep your legacy strong.”
