By Tim Kalinowski, Staff Writer
When a farm business goes in the tank and breaks apart today it is most likely not bad weather, poor crops or even overwhelming expenses that are to blame. It is usually because the family unit which runs the farm breaks down due to bad business management, divorce or poor succession planning. And at the heart of all these issues is certainly poor communication.
This was the re-occurring message of all the guest speakers at the RBC sponsored “Our World is Growing” women in agriculture conference held in Medicine Hat on Jan. 21.
“Planning is key for all aspects of our lives,” guest speaker Tara Schafer of MNP told the attentive audience during the panel discussion. “And a lot of it is plan for the worst, hope for the best. What are the results of bad planning? Bad relationships. You have everyone fighting in a family, you end up paying more tax than necessary. And you not only breaking up the business, you are breaking up a relationship in a family.”
Unanimous shareholder agreements, co-habitation agreements, pre-nups, a well defined succession plan which lays out what everyone should receive in the event of death; all of these things should be on the table right from the beginning of a marriage, said attorney Janis Pritchard of Pritchard & Company LLP.
“It’s normal we all want to be vulnerable in our intimate partner relationships,” explained Pritchard. “We want to be open. We want to be socially and emotionally intimate with our partners. And we want to be financially intimate; and we often want to have children… We also want to be safe. Those two things don’t have to be in conflict with each other. We can be safe and we can be open and vulnerable at the same time.”
And with a 49 per cent divorce rate in Alberta, Pritchard reminded the audience these formalized agreements do keep everyone involved in a family farm operation safe.
“That statistic applies to everybody in this room… The one piece of positive news is it is possible to have an earthquake go off in your family and still maintain your ability to operate your farm or ranch, and for both parents to maintain your relationships. How you choose to do that is really important. Because, bluntly, families don’t belong in court.”
Gwen Paddock, National Manager of Agriculture and Agribusiness with RBC, said it was also important for family-run farm operations to start thinking differently about their business models.
“You can have a family first business or business first family. The difference being, when you think about how families operate they operate differently than how businesses operate. You have heard the saying: You can pick your friends, but you can’t pick your family. Membership in a family is unconditional. Membership in a business though is based on performance and merit.”
Paddock went on to state family farms should also consider, again taking from that corporate model, well defined roles so everyone knows where they stand in the business, leadership based on who has the best head for the management side of things instead of birth order and downplaying the notion of what’s fair, as is the case in many family first businesses, and consider instead what will give you the greatest return on investment over the long-term.
“There are a lot of wonderful things about a family, but what I propose is you should be a business first family when it comes to your business part of it,” said Paddock.
Schafer agreed, but also acknowledged that such a transition is often not easy. It takes family members sitting down together and working out what everyone’s objectives and aspirations are within the family farm business.
“It’s a process,” stated Schafer. “It’s not something where you are going to sit around the table and in one or two meetings get it all straightened out. By figuring out what everyone’s objectives and goals are we can make the structure, the legal agreements and do everything to make it work for you. It’s your plan. We (financial and legal advisors) can skin the cat so many different ways from a tax and legal and structural stand-point. So a lot of this comes down to talking about what are your objectives, and we can help you ensure it stays that way.”
“Those are challenging conversations and most people don’t want to have,” concurred Pritchard. “But the reality is marriages break-down because husbands and wives don’t share the same beliefs or values about what’s important about money, intimacy and parenting. They believe different things and they have never had those conversations. And all it takes is different values in any one of those areas, and I divorce them.”
Paddock said despite the difficulties women sometimes face when entering a family agriculture business, statistics show the percentage of women in ownership and operating roles has been steadily rising over the past 20 years.
“When I think of the extremely talented women involved in agriculture today they have a lot to contribute to the industry. It’s a fabulous time for women in agriculture so go for it!”