Bringing more siblings and cousins on board can strengthen your farm, but be sure to do it right
By: Craig Macfie
Historically, most farms ended up being sold or split between siblings. Today, however, we're seeing a big change. Rather than splitting the farm, family farm groups made up of siblings and cousins are increasingly sticking together.
Sometimes these groups become active farming operations. In other families, they are land holding companies.
While good for the continuity of the family farm business, this does present new challenges for family business management and governance, mainly related to the fact that there are more stakeholders around the table, which in turn means there are more voices and opinions at the farm business table, which can hinder the business through unresolved conflict and inefficiencies – much like too many cooks in the kitchen.
Fortunately, there are governance best practices in the corporate world that farms can follow. In many cases, family farms can get more corporate without getting too formal.
Patti Durand, of Brightrack Consulting, explains, “The family members get to choose a meeting and decision-making process that suits them. It can be in a board room, or on a tail gate – you select what works best for you as a group.”
Patti is a coach, and facilitator based in Humboldt, Sask. and has worked with hundreds of family businesses to help initiate and guide decision making conversations and processes.
Before changes are considered, it’s important to have buy-in from the current principal decision maker(s). Usually whoever “has the gold, makes the rules.” If ownership or the controlling shareholder is on board with improved governance practices, there are several options to consider.
Pulling in the Same Direction
The Farm’s leadership is in charge of setting initial direction. Travelling was easier before kids. Similarly, farm business planning is more work with more people involved. Both short- and long-term goals should be established to confirm there’s general agreement and understanding among the stakeholders. Values should be articulated to assess the viability of working together with current and future partners. Establishing regular meeting times and agendas can go a long way in bringing structure to the larger group of stakeholders.
Decision Making
Here’s a quote from motivational speaker Jim Rohn. “You’re the average of the five people you spend the most time with.” In the farm business management context this means it's worth the effort to choose your advisors wisely. Your farm could be the average of the advisors you spend the most time with. If stakeholders are using different or competing advisors, mixed messaging could result. Once the key decision makers and advisors have been assembled, bringing them together as a board of advisors could be utilized to separate the wheat from the chaff.
Peer groups shouldn’t be confused with boards of advisors. Peer groups exist for mutual benefit and development. By contrast, a board of advisors should be focused on your specific farm business.
Also consider that it is possible to sign over voting control of your business to a formal board of directors while still retaining ownership. While not common, this could be applicable as family farm groups grow and as efficient and consistent governance becomes a bigger challenge.
Keep it Simple
As family farm groups increase in size, their corporate structure and entities usually do too. This is typically necessary for tax planning purposes, but it is important to aim to keep it functional. Advisors and farm owners should always consider ways to keep things simple. Is combined farm financial reporting possible? Are all entities using the same software or accountant? Can entities be migrated to online cloud accounting?
Standardizing policies and procedures becomes more important with more stakeholders around the table. Start with your most important and repeatable processes, such as filling the sprayers or ongoing bookkeeping. Eventually you will have a digital or physical collection of core processes and policies. It’s unhelpful to try to grow and scale a business without good people and procedures.
Succession Planning
Farm succession planning is a journey, not a destination. Before you know it, the next generation is knocking on the door. With more stakeholders around the kitchen table, succession becomes harder to ignore.
Patti Durand adds, “It will take more conversation and planning for siblings and cousins to prepare as a group to equip their successors to become co-leaders.”
It’s possible, on an annual basis, for the current farm owners to share their updated future vision and any retirement goals with the other stakeholders. Greater clarity will be gained, and the farm could be years ahead of neighbouring and competing farms in executing its succession plan.
As a family farm grows, so does the need for reviewing governance structures. Going forward more sibling, cousin, and non-family members will be involved in farm management and ownership groups. Getting ahead of the curve and proactively formalizing your governance structure will serve your farm well.
Craig Macfie, CPA, PAg specializes in providing fractional CFO services to growing farms and agribusinesses.
Patti Durand FEA, PAg provides strategic action planning support for family businesses. Find out more at www.brightrack.ca.
This article originally appeared in the October 2024 issue of Country Guide.
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