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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