MNP advisors talking with farmers

10 steps to maximize your farm’s success in the year ahead

10 steps to maximize your farm’s success in the year ahead

Synopsis
3 Minute Read

Farmers are facing many challenges in the current marketplace — and you may be wondering what steps you can take to successfully navigate the year ahead. Our advisors have identified 10 steps to help your farm achieve a successful year in 2023.

These steps include setting SMART goals, minimizing your interest costs, and participating in risk management programs. Review our checklist to discover how you can seize new opportunities and overcome obstacles in the year ahead. It is equally important to ensure you discuss the topics in this checklist with your advisor throughout the year to gain their insights and ensure your goals for your farm are aligned.

Farmers are facing many challenges in 2023, from high interest rates to the increasing cost of essential items such as seed, feed, and fertilizer. You may be looking at the year ahead and wondering what steps you can take to maximize your chances of success — and making the right decisions and exploring new strategies will be essential to navigate an uncertain marketplace.

Our advisors have identified 10 steps that help farmers achieve a successful year. We have summarized each step in this checklist to help you identify new opportunities and address challenges on your path forward:

check1. Develop SMART goals

Create goals for your farm that are specific, measurable, achievable, relevant, and time-bound (SMART). These goals depend on your unique plans for the future and may include reducing your fertilizer usage or increasing your crop yield by 10 percent. It is important to make sure that you write down each goal to help you monitor your progress toward it throughout the year.

check2. Optimize your capital purchases

Taking a strategic approach toward your capital purchases can help you manage your farm’s finances effectively. Consider whether it is more beneficial to lease or finance your capital assets. Additionally, keep in mind that 2023 is the last year that corporations may receive a 100 percent deduction for the purchase of certain capital assets, including Class 8 and Class 10 assets, up to a maximum of $1.5 million. Timing the purchase of these capital assets before the end of the year can result in significant tax savings to support the success of your farm in the future.

check3. Minimize interest costs through debt planning

It is essential to manage your debt strategically during times of higher interest rates. Consider how to manage your interest costs by exploring different options with your financial institution or bank — such as extending amortization terms over longer periods or implementing interest rate hedging strategies.

Additionally, it may be beneficial to assess your current interest rates and debt structure to identify opportunities to refinance or consolidate your debt. It is extremely important to stay up to date on the financing options available. These options are constantly evolving and may be different from those used by previous generations of your family.

check4. Benchmark your progress

Benchmarking provides a snapshot of your farm’s financial health in comparison with historical data or industry standards. It can reveal areas where your farm excels and identify areas where you may be losing revenue — such as whether you are spending more on seed on a per unit basis than in the past. An advisor can help you understand your benchmark data and explore solutions to help make your farming operation more profitable.

check5. Plan ahead to moderate tax

Managing taxes can play a key role in the success of your farm. Canadian-controlled companies may be eligible for the small business deduction, which applies a lower rate of tax on the first $500,000 of active business income. Additionally, exploring strategies such as pre-buys, income deferrals, discretionary expenses, capital asset management, and cattle inventory management can help minimize the tax liabilities of your farming operation.

check6. Apply for interest-free APP cash advances

In 2023, the Government of Canada will pay the interest on the first $350,000 of an Advance Payments Program (APP) cash advance to help farmers overcome obstacles such as high costs and rising interest rates. Applying for these interest-free cash advances can help you to manage your cash flow during the farming season and increase the financial stability of your operation.

check7. Participate in risk management programs

Participating in risk management programs such as AgriStability can help protect your farm from significant declines in income caused by production loss, market conditions, and increased costs. Speak with an advisor to determine whether your farm is eligible to enrol in this program and to discover more details about how to apply.

check8. Invest in an employee retention plan

Your employees play a key role in the success of your farming operation — and it is important to consider how to retain your workforce as a labour shortage impacts industries across Canada. Effective incentive tools such as a benefit plan or share ownership may help attract and retain talent. This will increase employee satisfaction while also contributing to the long-term growth of your operation.

check9. Update your estate plan

Succession planning is essential for the continuity of your farm. Ensure that you update your estate plan and consider the distinction between fair and equal compensation between family members. This means determining whether you intend to compensate each of your family members equally or compensate them fairly for their contributions to your business. An advisor can help you address these issues, guide you through decisions, and ensure your plan aligns with your goals for the future of your operation.

check10. Adopt the right technology

Implementing new technology can help increase the efficiency of your farming operation. Leveraging the Canada Digital Adoption Program (CDAP) grant and Business Development Bank of Canada (BDC) loans can help your operation identify and adopt new technology to support the success of your operation. These technologies may include data and analytics, crop monitoring systems, or precision agriculture tools to enhance productivity and effectiveness.

Serving the agriculture industry

Agriculture — it’s one of Canada’s core industries. It has also always been one of MNP’s key areas of focus. We have invested more time and resources into understanding agriculture than any other accounting or business consulting firm in Canada.

Take the next steps toward a successful farm

These ten steps can act as a roadmap to help your farm achieve success in the year ahead. Minimizing interest costs, optimizing your capital purchases, and applying for risk management programs can all support the future growth of your operation. However, it is equally important to discuss these topics with your advisor throughout the year to gain their insights, plan your taxes effectively, and ensure your goals are aligned.

For more information, contact a member of MNP’s Agriculture team. We have a range of experience regarding all aspects of agricultural business — from primary producers through to food and beverage processors.

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