It’s Agricultural Safety Week celebrating safe and strong farms and part of growing a safe and sustainable agricultural business includes planning for successful succession.
Running a farm business leaves little time to think about managing its future. If you put some time in to invest and plan ahead, you’ll be able to see the rewards for many years to come.
Here are 10 strategies to help you manage your farm’s future, make your money go further, and plan for succession:
1. Apply for Government Grants
Several government grants help Alberta’s Farmers. The Dairy Farm Investment Program provides licensed dairy farmers with up to half of the costs to improve your farm’s productivity and competitiveness, to a maximum of $250,000.
As an Alberta farmer, you could be eligible for funding to improve energy-efficiency through On-Farm Energy Management. This includes On-Farm Energy Assessments (available to dairy, swine, and poultry farms) and Energy-Efficient Retrofits, available to all farm types. Learn more about the grants available at https://cap.alberta.ca/CAP/Programs.
2. Government Loans for Farmers
The government has introduced a variety of ways to make borrowing money easier and cheaper for agricultural businesses. With the Advance Payments Program, you could access a loan of up to 50% of the value of your agricultural produce (maximum $400,000 per year). The first $100,000 is interest-free.
Through the Canadian Agricultural Loans Act Program, farmers can arrange loans from financial institutions including credit unions. This includes existing and start-up farmers and family taking over their parents’ farm. More information can be found by talking to our exceptional staff at Encompass Credit Union. Give us a call today.
3. Open an AgriInvest Account
AgriInvest is a government initiative designed to help Canadian agricultural producers set money aside. It’s a producer-government savings account that allows you to set money aside which can be used to help you recover from small income shortfalls or to make investments that will help to reduce on-farm risks. You can watch your AgriInvest account grow as you make annual deposits and receive matching government contributions. To get started, just bring in your Deposit Notice and we’ll open an AgriInvest account for you. You can deposit any amount up to your maximum matchable deposit by the deadline on your notice and then Agriculture and Agri-Food Canada (AAFC) will credit your account with your matching government contribution.
4. Create a Business Plan
A business plan isn’t just an essential tool to help you get government grants, loans or other sorts of funding. It’s also your blueprint for growing your business and how to achieve that.
Your Encompass Credit Union branch can help you put one together. You want to make sure it contains these essential elements: An executive summary; goals for the business; your background; ownership structure; financial statements; details of your produce; your market and growth potential; and marketing plans.
5. Protect Your Farm Against the Unexpected
What would happen if you were to die or become disabled? Could your family manage the farm without you? Life and critical illness/disability insurance are essential elements in managing risk. They allow your family to continue running the farm in your absence.
The insurance money could help maintain cash flow, hire staff and pay off debts. Talk to our exceptional staff at PlanWright Financial to discuss the best insurance for your situation.
6. Risk Management
Thinking ahead is one of the best ways to manage risk and ensure you’re covered for all eventualities. To successfully manage risk, you need to have ready access to capital; to be able to pay all of your bills, on time; to survive any short-term, unexpected financial shocks; and to be able to grow your assets.
7. Solid Financial Planning
Maintaining a good level of working capital is essential for successful growth. It means you will rely less on lines of credit or loans, and so maximize your profits. If your working capital is low, you may be forced to sell produce to pay bills, rather than selling at the optimum time, for maximum revenue.
Keep on top of your cash flow situation. Prices can fluctuate considerably, so work out your average income and expenses and use these figures to create cash-flow predictions.
8. Prepare a Will
According to recent surveys, over half of Canadian adults do not have a will. This is hard enough when you have a modest amount to leave, but when you own an asset like a farm, it is essential to prepare and maintain an up-to-date will. Not only does a will outline how you want your assets to be distributed, it also allows you to name the executor, the person who will ensure that your instructions are followed.
Dying without a will could lead to your farm being broken up into many pieces and your family members fighting in court. Your farm’s future will rely on you getting a will. Talk to a lawyer about getting a will right away.
9. Exit and/or Retirement Planning
According to Stats Canada, 92% of Canadian farms have no transition plan. You will have to exit the business one day, so plan now to ensure that it goes smoothly.
Succession planning will help you determine who will take over the farm, and how that will happen.
Without a succession plan, your family may be forced to sell, especially in the case of unexpected death or illness. Talk to your PlanWright Financial wealth management team to discuss ways to ensure your exit strategy fits in with your retirement plans.
10. Get Expert Help
Like a business owners, farmers can’t do everything. To grow steadily, you need to plan ahead and get advice from financial experts like accountants, financial advisors and your friendly local credit union.
Encompass Credit Union and PlanWright Financial can help you manage your finances through good and bad times, access the funds you need to grow and make sure you have a solid succession plan. Many farmers react to change only when things start to go wrong. Contact us today and we’ll help you plan for change and manage risk.