We have had a number of calls in recent years from young professionals who left the farm, went to school and now have good jobs. After a few years, these young professionals realize their hearts never really left the farm. Starting farming can be terribly overwhelming when you consider the huge investment in land, machinery and input costs. Fifteen years ago it was more common to see the next generation quit the full-time job to farm full time with very little transition. Today we see many of the next generation gently transitioning between off-farm work and the farm business.
Our friend Danny Nintafive is a perfect example. He works for the government and lives on the edge of an urban centre. Nintafive has worked professionally for 10 years and as such has a significant salary, pension and vacation package. He loves his job and is very good at it. Nintafive’s family farm is about 30 minutes from where he works, and, combined with beautiful women and golf, rounds out his list of top three enjoyments in life. Although the farm is a passion of his, his involvement has come with more benefit than simple enjoyment.
We first helped Nintafive with annual business planning when he got married. He and his wife used the provincial agricultural lending agency’s young farmer program to access capital at a subsidized rate to purchase a quarter section with a house and yard. The mortgage interest was a tax deductible expense. He started by trading labour with his parents for equipment use. Slowly and consistently, they expanded the grain operation. Through pre-buying inputs for the upcoming year and deferring cash sales he accumulated significant equity through deferred income tax. Positive accrued incomes but cash losses allowed for significant equity building over a number of years.
Nintafive realizes he hasn’t avoided this tax but rather deferred it to a point in time where he may incorporate or no longer have his professional salary creating a tax problem. Maintaining his off-farm income has allowed his parents to very gradually reduce their workload and has made for a gradual and smooth transition into retirement. His off-farm salary has also allowed the farm to grow more quickly than it otherwise could have on its own.
Over the years we have facilitated a number of strategic and business-planning sessions with Nintafive and his family. He views his off-farm work as simply another enterprise on the farm. The secure and consistent nature of this cash flow stream has been a great risk-management tool. This income stream has also allowed his parents to be more comfortable with taking drawings out of the farm without jeopardizing the success of the farm. These planning sessions resulted in a heightened awareness of the direction the entire operation was taking. This awareness created understanding and the entire family was then working toward common goals.
The Nintafives are hesitant to give up the off-farm job because of the numerous professional business relationships Danny has developed. He is a professional colleague with input suppliers, agronomists, grain merchants, accountants and solicitors. He also spends a great deal of time in his professional role working with other very progressive farmers. This has provided Danny with a group of very successful mentors from which they can draw ideas and experience. Working off the farm has also given Danny the opportunity to develop very strong computer, technology, communication and human resource management skills. This skill set is new to the operation and is proving to be a real benefit.
The past 10 years have flown by for the Nintafives and Danny and his wife have a great start to their own retirement planning through significant pension contributions with his employer. They believe this will help them greatly when the time comes to hopefully begin their own farm succession plan as it will reduce their required drawings for retirement.
It hasn’t all been roses; Danny has put in some long hours and missed some advancement opportunities at work. He and his wife have enjoyed their worklife balance like Tiger Woods enjoyed his televised apology speech. Ensuring awareness and understanding of a common business plan can create an environment in which an off-farm job and farm can have a powerful synergy.
AndrewDeRuyckandMarkSloanemanage twofarmingoperationsinsouthern ManitobaandarepartnersinRightChoice ManagementConsulting.Withover25years ofcumulativeexperience,theyoffersupport infarmmanagement,financialmanagement, strategicplanningandmediationservices. Theycanbereachedat [email protected] and [email protected] or204-825- 7392and204-825-8443