Starting a Farmin

Ontario

Being an Entrepreneur is like eating glass and staring into the abyss of death

2

Elon Musk

3

Am I suited for farming? Why do I want to own and/or operate a farm in Ontario? What are the pros and cons of me starting a new farm? Do I have the personal and business skills to take on the challenges

and opportunities that are required? If not, am I willing to seek out the necessary advice and skills?

Does my personality suit the farming lifestyle? Am I prepared to lower my standard of living to start the farm? Am I prepared to work long hours and weekends to make ends meet? How will I handle the seasonality of the work? Is this the right time to start a farm (based on my life and the industry?) Have I discussed my idea or proposed plan with an advisor and

considered their advice? Does family and friends support my farming idea?

being your own boss is

GREATyou get to

CHOOSEwhich 18 hours a day you

work5

You miss 100% of the shots

you don’t take.

Wayne Gretzky

6

New Farm Business Structures

• Partnership

• Corporation

• Joint Venture

• Cooperative

New Farm Business Structures• Partnership: A partnership refers to a relationship where two or more

persons carry on a business with a view to make a profit.

Advantages Disadvantages

Income splitting Legal liability for other partners

Intergenerational business transfer

No protection from personal tax rates

Lower costs (than corp.) More complex (than sole prop.)

Capital gains exemption ($750K) Recordkeeping requirements

Easier to dissolve

Tax deferral provisions (asset transfer without immediate tax*)

New Farm Business Structures• Corporation: A corporation is a separate legal entity, which means it

can do anything a person can.

Advantages Disadvantages

Lower tax rate than personal Complex structure/requirements

Faster repayment of debt (tax) Loss of cap. gain exemption

Liability Tax and shareholder costs

Perpetual succession Loss for personal tax benefits

Flexibility

Personal cap gains exemption utilization

New Farm Business Structures• JV: The joint venture can be used to test a business relationship or

allow a child to gain management experience and ownership in business assets. A joint venture, while not defined in the Income Tax Act, generally refers to a business structure that closely resembles a partnership but lacks one or more of the essential elements of a partnership.

Advantages DisadvantagesCap assets shared High potential for disagreement

Assets owned individuals, can be rolled

Can be interpreted as partnership and negative personal tax/liability implications

Labour/management shared No independence from JV partner

Dissolution is simple Loss for personal tax benefits

Low est. costs

Allows next gen. to dev. experience

New Farm Business Structures• Co-operative: A co-operative is a business organization owned by the

members who use the services of the co-operative. Control rests equally with all members and surplus earnings are shared by members in proportion to the degree they use the services.

• Basic Principles:– Voluntary and open membership– Democratic member control– Member economic participation– Autonomy and independence– Education/training/information to members– Cooperation amongst cooperatives– Concern for community

• For-profit, or not-for-profit models

Business Plan

1. Strategy– Building your business in an intentional way; continuously planning,

monitoring, and assessing the abilities and needs of the business to meet its goals.

2. Production– What will influence how you will grow your product? Is it cost effective?

3. Marketing– Do people want your product? How will you sell it?

4. Benchmarking and Growth– What is success? How do you know? What is your growth plan?

5. Human Resource– What capacity do you have? Do you need? How will you manage?

6. Financial– What is your budget? Must haves, nice-to-haves, can’t haves?

7. Social Responsibility– Is my plan sustainable?

Ways to Sell Your Product• Marketing Boards

• Direct Marketing

• Value Added Ventures

Marketing Boards• Corporate bodies representing producers of one or more

specific agricultural commodities. • Boards of directors are elected by producers. • Authorities are delegated to each board by Provincial

Commission to regulate production and/or marketing of those commodities. This includes the authority to set a mandatory licence fee for producers, with the fees used to finance the activities of the board.

• Marketing authorities vary widely among boards in the degree to which they control how producers sell their commodities and how companies who purchase raw agricultural commodities (i.e. food processors, dealers) source and purchase their requirements.

Direct Marketing

Unlike traditional methods of selling products, such as wholesale into the marketplace, direct farm marketing allows for greater control by the producer, including the ability to be a price maker - not a price taker.

Forms Of Direct Farm Marketing• Opportunity to choose the type of operation they wish to pursue

based on their product mix, skills and market access.• The most popular types of direct farm marketing include:

– on-farm activities (roadside stands, farm markets/shops, pick-your-own operations and community-supported agriculture)

– off-farm activities (vendor at farmers' markets or selling through online sales and direct delivery)

Value Added Ventures

• Producing and marketing a real or perceived quality attribute– Organic, natural, “low-phosphorus fed swine”, free-run eggs

• Bundling products– Pasture and woodlot: selling beef and flavoured wood chips for

grilling

– Produce baskets

• Enhancing return per product unit through processing– Baking, butchering, beeswax candles

A brand is no longer what we tell the consumer it is – it is what

consumers tell each other it is.

Scott D. CookCEO, Intuit

Step 1:Vision

19

Building Sustainable Strategy

Used with Permission: www.the naturalstep.org

Modified Maslow’s LawGrowth*

Tension/ Stress

Actualization

Esteem

Culture

Safety

Basic Operation generating revenue, paying bills

Consistent revenue/profit, risk mitigation

healthy workplace, work-life balance,

viable

confidence, brand recognition

creativity, problem solving, innovation

Modified Maslow’s Law

Risk

(soc

ial &

eco

nom

ic)

Prof

its/

Reve

nue

Liab

ility

Step 2:Focus

23

Building Sustainable Strategy

Used with Permission: www.the naturalstep.org

What gets measured, gets managed.

Peter DruckerFather of Management Theory

24

Materiality & Benchmarking

• Materiality: What is relevant to your vision?

• Benchmark: What can I realistically measure?

Develop SMART Goals

• Define goal• Who is involved? What is being accomplished? Where is being done? Why am I doing

this? Which resources do I need?

Specific

• Can I track progress and measure outcome?• How will I know I reach my goal?

Measurable

• Is it reasonably likely to be accomplished?

Attainable/Achievable

• Does it contribute to my Vision?

Relevant

• Does it have a time limit?

Timely

ExampleObjective Key

Performance Indicator

Performance Measure

Goal Actual

Environment Energy Consumption

Water Quality

Energy Use (kWh)

Nutrients in waterway

X

Y

Social Improving Community

Family Health

Adopt RoadSponsor Team

Sunday Dinner

Y/NY/N

45Economic Production

Efficiency

Business Continuity

Annual YieldProd. Efficiency

Actual Growth Rate

Z+2%

3%

Take Steps to Meet Goals

Step 3:Continual Improvement

There is nothing so useless as doing efficiently that which should

not be done at all.

Peter Drucker

30

Understanding “Lean”

• Concept focused on the removal of waste from the production process

• Waste: Anything that consumes time or resources but does not add value to the product/service, as viewed from the perspective of the customer.

Types of Waste

1.Unevenness in a process– Stopping and starting process or variable volume process

rather than a smooth and constant process– Leads to time and energy waste

2.Overburdening or placing too much upon one thing– Where a process/machine is pushed to perform above its

capacity– Leads to broken machines and potentially poor quality

products– Can be a reaction to #1…

Understanding “Lean”• Concept focused on the removal of waste from the

production process

• Waste: Anything that consumes time or resources but does not add value to the product/service, as viewed from the perspective of the customer.

• Customer: the receiver of product from a process. Most of the time you are your own customer!

• Defines value through Value Stream Mapping

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Defining Value

Martin Dairy Farms Case Study• Dairy farm (calf production process)• When asked to define value for customer, Martin looked closely at the

calves' weight. • Saw that the customer (the "heifer production" line) demanded calves

grow to 100 kg at 8 weeks old. • But they had never weighed the calves. (They had focused on mortality

rate alone.)• Getting a handle on the process from the customer's point of view was

an eye opener.• They found, too, that the heifer production process didn´t need so

many calves. • They had been pushing all the calves from the milk production through

just because they were used to doing so. • Martin changed to meet the needs of the customer by sorting calves

out early in the production line and more careful planning.

Recap

• Setting a Vision• Focussing on SMART goals and Performance Measures

to reach them• Plan-Do-Check-Act to achieve continue improvement

– increased profits, work-life balance, and resource protection

• Understanding production processes and who your customers are

• Are your customers “pulling” the product, or is it being mindlessly “pushed”?

• Where is your waste?

OMAFRA Resources

Starting a Farm in Ontario

Business Resource Guide for New Farmers

Cost of Production Models

Growing Your Farm Profits (GYFP) Workshops

Agriculture Information Contact Centre

The best way to predict the future is to create it.

Peter Drucker

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