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Hiring business management advisors on the farm

As an agricultural banking specialist at Scotiabank, Jay Cunningham talks to farm people on a daily basis about their business plans for their farm. One of the trends he is seeing is a small but growing proportion of farmers who are hiring business management advisors. “I find there is increased interest in medium- and larger-sized operations in having somebody with a background in different management skills coming in and either helping them to get through a project, like writing a human resources handbook, for example, or having another set of eyes to look at the books, or if they want to do some succession planning, do an expansion, or do some sort of new enterprise where they’re going to have to leverage the success of the existing operation,” says Cunningham.

Interest in hiring business management advisors is growing “because the dollars are getting bigger,” he explains. “Agriculture has always been a highly capital-intensive industry, and it’s getting more and more so. The price of land is going up, machinery is not getting any cheaper, and some of the specialty ventures like greenhouses and some of the quota industries are very highly capitalized. So farms are going from being small- or medium-sized enterprises that are generally family-based ventures, entering into something that is more commercial. In doing so, farmers require some additional inputs and they have to consider some additional things; they’re getting into staff, into a lot higher finance, and the financial institutions want to make sure they get good, relevant information and practical business solutions,” he says.

Cunningham encourages farmers to learn as much as they can about business management, but he also believes that bringing in some specialized business expertise could be helpful. “It just stands to reason that you can’t be good at everything, and especially for an operation where there are only one or two people working it, it’s a lot to ask.”

Of course, getting business advice is not completely new for farmers. He says, “They always did, and generally with their accountants. And now we’re seeing a growing number of the more rural-based accounting and financial management services providing the necessary service so that the farm operations have a source available to them to provide them with that type of extended service and advice.”

He adds, “I would say that if you are going that route, then just make sure the accountant you’re talking with has the interest and background in the subject that you want to discuss. For instance, if you want help with farm succession, then make sure he knows about farm succession and all the intricacies involved.”

More organizations and individuals providing help
Growers can also seek farm business advisors in other ways. For instance, the Canadian Association of Farm Advisors (CAFA) offers a Farm Advisor Listing by region on its website (www.cafanet.com). CAFA is a non-profit professional organization dedicated to assisting farm businesses by increasing the skills and knowledge of farm advisors.

CAFA executive director Liz Robertson says, “The Farm Advisor Listing is a list of anyone qualified to become a CAFA member who has a professional advisory or consultative relationship with farmers, farm businesses and agribusinesses. They range from accountants, bankers, financial planners, lawyers, and human resource consultants, to interested farmers and input suppliers; about a third of our members are agrologists, as well.” 

She adds, “About 90 percent of the people listed not only have a business relationship with farming, they have a personal relationship with farming; they come from a farm, their spouse farms, or they farm themselves.”

CAFA uses two measures to ensure that the people in the listing are qualified to provide advice. ”First of all, for someone to become a CAFA member, we ask quite a few questions. One of the things we look for is membership in a self-regulatory organization or licensing body; the majority of our members belong to that type of organization or licensing body, such as a chartered accountant association, the Law Society of Upper Canada, or a professional agrologists association, as their primary organization. We also expect our members to have had a professional relationship with farm families or businesses for at least two years. And we want to make sure there have been no professional sanctions against them, that they haven’t declared bankruptcy, and that they don’t have a criminal record. And we want them to have referrals from two CAFA members,” explains Robertson.

The other measure is CAFA’s own certification process. The organization issues a Certified Agricultural Farm Advisor certification for members who meet CAFA’s continuing professional development requirements.

Robertson sees a growing interest among farmers in obtaining business management advice. “Even in just the last five years, there has been a big shift. I think a couple of factors are coming into play. Of course, there are the demographics about farmers retiring, but the other side of that is the people coming in to replace them, whether it’s their children or other younger people buying them out, or people buying smaller farms for a retirement place.

The chances are really good that these people coming in have had some business education at university or they come from a business background. As well, people who have been in agriculture for many years are realizing that agriculture is a business, it’s not just a right anymore. So I see farms becoming wholly business oriented as an inevitable change. It’s an evolution that is going to come from the sector itself, which I think is very positive.”

Resources and guidance available
Another online, searchable resource is the National Farm Business Advisor Database on the Canadian Farm Business Management Council (CFBMC) website (www.farmcentre.com). Heather Watson, CFBMC’s general manager, explains, “Through conversations with industry stakeholders, including farmers, advisors and associations, in addition to feedback from our members and specifically provincial/territorial agricultural representatives, we identified a need for farmers to source expertise in farm business management from across Canada. Given our mandate: national co-ordination of farm business management and providing greater access to resources (one of which is farm advisors), it made sense for the Council to lead such an initiative.”

She says the advisor database is easy to navigate and is user-friendly. “Farmers can search the database by keyword, location, language, commodity or sector, and farm business management specialization. Results can be sorted according to years of experience, education and location.”

As well, the CFBMC website provides descriptions and links to resources such as How to Choose a Farm Advisor, definitions for advisor associations, and common terms and acronyms used in the advisory world.

CFBMC’s approach to listing advisors differs from CAFA’s method. Watson says, “While other associations and organizations have advisor listings, these are restricted to their members. The CFBMC database is truly all inclusive. Any advisor, whether affiliated with a designating organization or not, is welcome to become part of the database.”

To ensure that the people listed in the database are qualified, CFBMC requires that advisors register to the database and complete a personal profile. “This process adds accountability to the advisors, who are solely responsible for the information they have entered. It is the responsibility of database users to verify the accuracy of qualifications and experience, which is why we provide literature and resources as such. Also, advisors list their professional designations, and it is therefore the responsibility of the designating bodies to ensure appropriate use of these designations. Should CFBMC become aware of any false representation of information, we do, however reserve the right to remove the profile from the listing,” notes Watson.

CFBMC is finding that farmers are increasingly interested in obtaining business management advice. Watson says, “Farmers cannot be all things at all times. We are seeing successful managers coming to this realization and recognizing the value in sourcing expertise to ensure their ‘management toolbox,’ as it were, is complete. Farmers then, need to have the right information available to make informed decisions about using farm business advisors, what to expect and how these services play into the grander scheme of farm business management. More and more, we’re seeing farmers must look outside of the advisory services immediately available to them (by geographical default), to obtain the expertise they seek or require.”

From Cunningham’s perspective, business management skills are key to a successful farm operation. “I was asked a question recently by a new prospect who said, ‘What are you looking for in a new client?’ We are looking for very capably managed operations with a high probability of success and profitability. And in that is the management component because we’re putting out a good deal of capital in a lot of cases, but we can’t be there every day, so we have to trust that their day-to-day management skills are going to carry them through making the tough decisions.”

He emphasizes, “My own opinion is the more information, the more analysis, the more experience that we can get into the agriculture industry, the better farm managers will be.”

But he notes, “There has to be the desire to manage better. When prices are high, and things are good, maybe that desire isn’t quite as strong. When everything is going badly, there seems to be a lot more interest in improving business management. I’d like to see that level out. The really good producers are the ones who are constantly moving forward at a steady pace with planning and forethought, and they’re using the resources and they are on top of it; they know their cost of production, they know what’s going on in the market, and they are well rounded.”