Financial Fitness

Farm Credit Canada (FCC) is urging producers to think about how financial fitness can advance their own agribusiness.

“Farmers are always busy, so there’s never a good time to reflect. But planning is key to business success and individual success contributes to a vibrant industry,” says FCC Chief Operating Officer Rémi Lemoine.

FCC has created a list of 10 considerations to enhance personal financial fitness. The more farmers pay attention to these considerations, the more likely they are to succeed. “These tips apply to everyone, and they’re particularly important for young farmers who are the future of the Canadian industry.”  He says that FCC research shows that young farmers are more likely to believe that farm or business will be better off in the next five years if they follow the tips.

10 Financial Fitness Tips

1. Plan ahead. Successful farmers take the time to create a business plan. What do you want your operation to look like in five, 10 or 15 years? Write down strengths, weaknesses, opportunities and threats. Then consider how to build on strengths, take advantage of opportunities and mitigate weaknesses/threats. What is your goal?  Consult “Prepare Your Business Plan” under Learning Centre/FCC Business Planning Award on the FCC website, www.fcc.ca, to see a business plan template.
2. Know your financial picture. What is your debt-to-equity ratio? What were your equipment costs last year?  What did you grow and how do you track what you sell? Did you meet the goals established in your business plan? Knowing these things will help to produce better decisions.
3. Calculate profit. Younger farmers typically have less equity, making it more important to focus on the bottom line. Did you make enough to cover the cost of living, operating costs and payments?
4. Purchase versus rent/lease. What impact will a debt-financed purchase have on the balance sheet or taxes? Given your equity, renting or leasing may be a solution.
5. Gain access to credit. An input purchasing strategy coupled with adequate, ready-to-use input financing can help you maximize profits. Consider off-season purchasing to realize overall cost savings and put in place pre-approved credit to let you hold commodity inventory until the market will pay the most for it. Most producers still don’t have an inventory marketing plan.
6. Learn. The agriculture world is changing fast and requires that you stay abreast of current trends, best practices and marketing solutions. What type of course would enhance your skills? FCC offers several learning opportunities free of charge at www.fcc-fac.ca/learning.
7. Consider the global economic environment. Since interest rates are very low, the only way they’ll go is up. If rates rose by one per cent, could your business withstand it? What impact will it have on land values and the overall market? What about the strength of the Canadian dollar? For example, a one-penny increase in the Canadian dollar compared to the U.S. dollar decreases the price of a hog by one dollar.
8. Think about your employees. Develop a strategy to attract employees and retain them over the longer term, whether they are family or not.
9. Ask for help. Focus on what you are good at and seek help with the rest. Talk to your accountant. Hire someone to help you market your product. Look at risk mitigation tools with your financial service provider. Ask your lawyer for estate planning advice.
10. Investigate technology. Is there a new way to do something that can save you time and money? Consider keeping field records in one place with software found at www.fccsoftware.ca .

For more information, visit www.fcc.ca