Farm Succession Conference 2002

Help clients identify financial benchmarks
By: Wilson Loree

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How can you best help your clients?

In order for a farm to last long into the future, it needs to be financially strong. As a result, farm management consultant Wilson Loree, former Director of the Agriculture Management Service of Alberta Agriculture, Food and Rural Development, believes helping clients determine financial benchmarks is one of the best services you can provide.

"When you consider thin profit margins of about 10 per cent, knowing how much production is needed to break even is very important," said Loree.

Why does such a simple task elude many farm managers? (in fact, many managers in all sectors). For one thing, Loree points to surveys that show 70 per cent of people perceive change as negative (25 per cent are neutral while only 5 per cent view change as positive).

Another key question needs to be asked in the equation, suggests Loree: "The family needs to ask themselves if they even want the farm to continue."

Finding the break-even point and what it will take to get there, then turn a profit, will help answer that fundamental question.

Loree, a long time economist, understands the power of numbers. But he also knows the benefits of a good attitude to the bottom line.

The ideal advertisement

All too often, points out Loree, business owners set the wrong tone to potential successors. An ad looking for a successor might accurately read:

"No specific skills needed. Will be under constant supervision of owner. Will not be expected or allowed to make important decisions. No vacations for five years."

You get the idea.

The ideal approach, illustrating the right owner attitude, is summarized in the following ad:

"Assistant Farm Manager Wanted"
Responsible for learning to manage and develop the family farm business. Will focus on the grain operation and the financial management of the farm in cooperation with the owner. Will contribute to overall farm operating plan by researching and planning cropping strategy and marketing opportunities. Will use farm records and financial information to contribute to the overall farm plan. Will assist with scheduling and completing all daily farm work.

Skills required include willingness to learn, ability to work in cooperation with others, ability to work as part of a team with other family members and employees, desire to be responsible for the overall management of a farm business and strong communication skills.