B.C. TRANSITION TOOLKIT FOR NON-FAMILY FARM TRANSFER – Stage 1
Finding a Successor
You’ve decided you want to transition your farm to the next generation. You have a clear sense of your vision for the future – now you need to find the person, or people, to help you fulfill it.
TRANSITION ROLE: Attracting the right person will be easier if you understand your desired level of involvement as the transition progresses. What role do you want in the farm business, both short- and long-term? Some current farmers are ready to retire and move off the farm; others want to be more hands-on. This is a great moment to consider different possible roles: moving into an advisor role, helping with farm labour, actively mentoring the farmer in day-to-day operations, or setting up a board where you’re involved but not making business management decisions.
QUESTIONS TO ASK YOURSELF:
- How can you best contribute to the long-term success of the business?
- What fits best both the long-term needs of the farm, and your own personal needs?
- What will you realistically have capacity for (physically, time-wise, etc.)
- How will your role allow you to balance providing expertise with the entering farmer’s need for independence?
- How will your role evolve? You may be more involved initially and step back over time.
Next, it will help to understand what you’re looking for in a successor – the qualities and qualifications you’d like someone to bring to the table. What does your ideal entering farmer look like? Take the time now to write down ideas. Here’s a list of criteria that current farmers shared:
- Farming experience is a must! Farmers we spoke to found that prior experience was the #1 indicator that an employee would stick around. Farming is tough, and making it through a few seasons is a clear indicator that you have the skills and are committed to a farming career.
- Good communication skills and the ability to work through things with people.
- Shared philosophy, values, and stewardship practices.
- Financial resources.
- A good support system and community (did we mention farming is hard?).
- The capacity to be a strategic, visionary thinker and confidence to make crucial decisions.
- Flexibility and adaptability to respond to uncertainty, change and new opportunities.
- The right attitude: enthusiasm and passion!
You may find certain criteria may be a higher priority than others and some will be more needs-focussed versus desired. For example, if you have a livestock operation a successor will need to have experience pertinent to managing livestock. Skills related to social media marketing by contrast will be less important and be considered an asset but not a requirement.
WHAT ARE YOU OFFERING?
Now that you’ve got your vision – for yourself, your farm, your land and for the right successor – how you frame the opportunity will impact who comes to the table. Many current farmers want to be able to see if there’s a fit with potential entering farmers before committing to transition plans. This is a wise approach. That said, making the long-term potential clear will attract farmers who are looking for such opportunities. As well, how you frame the opportunity will depend on how involved you want to be and your retirement timeline.
Stage 3 of this guide explores different planning solutions, such as leasing, employment, and joint ventures. These solutions may help current farmers frame an opportunity with a concrete short-term offering (say, a farm manager job), while indicating that they are open to exploring longer term transition opportunities – for the right fit!
Some current farmers may be more interested in securing a successor and having a faster transition. In this case, the transition offering would be more direct and explicit. The more concrete your offering is, the more likely you’ll attract someone serious and qualified. Potential information to include:
What are the attributes of the land (e.g. size, zoning, water, soil, infrastructure)? See Site Assessment Checklist in the YA B.C. Land Access Guide for a full list.
- What is the history of the farm and land?
- What is the current farm business model?
- What is the current culture and values on the farm?
- What is your vision for the future and what could a long-term opportunity might look like? This could be quite different in a co-op farm vs a private enterprise.
- What qualifications are you looking for in potential entering farmers?
- What role will they have on the farm, and what are the expectations?
- What remuneration will be provided (room, board, wages, equity, etc.)?
- What resources should applicants have, and what level of commitment are you seeking?
UNDERSTANDING YOUR FARM’S BUSINESS VIABILITY
While you may not share this information far and wide, it is essential for current farmers to have a clear understanding of the current farm business operations and financial viability.
Detailed documentation of the current status of the operation will be valuable when talking to potential successors, and will be necessary for next steps. This could include a description of the current farm business, including products, markets, customer base, assets, any organizational charts or diagrams to visually explain/represent current land/business overlaps and details etc.
It is also important to consider how a transition plan will impact the financial picture of the farm. If assets are to be removed or additional loans required, the transition plan should be included in the overall goals and borrowing needs of the farm, so that debt can be structured, and cash flow maintained. Debt should be structured like investments, so that debt payments are staggered over years rather than piling up on one another. This also mitigates interest rate risk.
QUESTIONS TO ASK YOURSELF:
- Is your business viable? What does “viable” mean to you? How might this compare to definitions from others? What is your business “worth”?
- Is there an existing business plan? Does it need to be updated?
- Is the farm meeting its business goals? Is it profitable both now and in the long-term? If the answer is no, that’s okay, but you’ll need to work with an entering farmer to arrive at a mutual understanding of future viability and develop strategies to address any shortfall.
PUTTING A DOLLAR VALUE ON YOUR FARM BUSINESS: It can be hard to figure out the economic value of your farm business. However, understanding what the value of your business is will help entering farmers assess the opportunity, and help you negotiate fair terms to ensure your needs are met.
There are three main ways to figure out the fair value of a business, though other ways do exist. You can base fair value on 1) future earning potential, 2) on the sales value of similar businesses (if such information is available), or 3) on the business’ assets (after subtracting liabilities). It’s important to arrive at a valuation that feels fair to both parties. Farmers should always consult a professional for valuation. A qualified Chartered Business Valuator can value the business and provide a report.
WHERE ARE THE ENTERING FARMERS?
Now it’s time to put the word out and find your entering farmer match. Where are they now? How can you reach them? Maybe they’re already in your network – you know who they are but haven’t really started these conversations yet. One farmer we spoke to had been looking for someone to take over their poultry operation for a few years, before finally striking up a conversation with a neighbour who turned out to be the perfect fit. Maybe you have an excellent long-term employee who would be interested in solidifying their role for the future. You may have to reach further afield, using outreach opportunities in your community and online. Here are some suggestions:
- Community: let your community of farmers know you’re looking, use bulletin boards, local papers, etc., engage your local Farmers’ Institutes and Producer Associations.
- Events: go to Young Agrarians and other farm-related events to meet potential entering farmers and put the word out about what you’re looking for.
- Online web tools: YA land blogs, U-Map, Farmlink, listservs such as COABC, BC Urban Farmers, etc.
- B.C. Land Matching Program (BCLMP): Talk to a YA Land Matcher!
You have a successor! Now what? Once you’ve identified a successor, you can begin the transition planning process in earnest. While it’s essential to understand your vision, goals, and needs before seeking an entering farmer, for a transition plan to be successful it should ideally be co-created. This means both parties to the transition are actively engaged in developing a common vision and moving it forward. The next sections will explore starting the conversation, communications tools, and planning.