Backswath Management Inc.

Advancing farm management

Agricultural investment demand

The agricultural sector remains attractive for both owners and investors alike. With companies seeking more stable investments during times of economic uncertainty, agriculture and farming is a very appealing option, particularly highly productive lands. There was an immediate impact on grain pricing as early as 2008, something that has continued to the present day. The escalating price of food, especially food staples like grain products, has continued to climb in recent years, meaning larger profits for many farmers, notably grain operations in Canada.

“With the demographic shift of the baby boomers, there is more awareness of the value of food, from an abundance and scarcity perspective, and from a quality perspective,” Terry Betker, President of Backswath Management, commented. “The surge in grain prices began at the start of the recession. People in some countries that never had to worry about the supply of food didn’t have it now, so they stockpiled rice and wheat.”

Additionally, in countries like China, a major agricultural producer, this shift has seen more and more families moving into middle class status. Statistics show that more Chinese will shift to middle class than the total number of people living in the United States.

“One of the ways middle class in China defines themselves is by what they eat,” Betker said. “300 million people eating more protein-based food causes a global shift in demand/supply relationships within primary agriculture. This presents potential opportunities for Canadian farmers.”

Domestic realities

It was not long ago when farmers were expected to be able to ‘do everything’ on their farm. A farmer’s broad skill set and abilities were directly connected to a strong sense of independence. Today, things are changing and while the foundation of multiple management skills sets still exists, it is far less common.

There is a truism in business that applies to farming; a business typically outgrows its management. With farms becoming increasingly larger and more complex, the prevailing wisdom is that business-focused farmers cannot be all things to all aspects of managing their business.

A challenge for management lies in the subtleness of growth. A farmer should not try to manage a 10,000 acre farm or 500 cow dairy the same way they managed a 1,000 acre farm or 50 cow dairy. Betker said, “There is no light switch that says when a farmer moves from 4,999 to 5,000 acres, they must do this or that. The requirement to introduce new management practices is more specific to the individual than it is to increasing acreage. Ideally, management upgrades should be aligned with the demands associated with growth.”

There is no one correct approach for filling the different resources required to augment a farmer’s management skills. Some resources will already be in place, while others may not be being used effectively. The relationships with resources typically vary from casual, one-off interactions to regular and periodic.

Management advisors can help with identifying and selecting appropriate resources.

Betker and Backswath Management Inc. has provided management resources to farmers for more than 25 years, recognized as a visionary and leading-edge contributor to farm management. Betker has advanced an interest and passion in providing consulting expertise to farmers. Through its innovative farm management consulting service, Backswath focuses on:

helping farms manage growth
business continuity planning by assisting farms through intergenerational transition and succession
peer-to-peer network development
Backswath operates primarily in Canada and has exposure internationally, including the United States, Mexico, New Zealand and Chile.

Service delivery model

Backswath’s service delivery is based on a unique management model. Containing a practical managerial self-assessment tool, the service delivery model is based on the application of Balanced Scorecarding that defines the management practices of a farm. The assessment is then referenced against a database of the best practices of leading farmers who have completed the assessment.

The model includes a unique financial software application that forecasts a farm’s future financial performance. The application averages historic income statements and applies the data to the current year balance sheet, forecasting the balance sheet five years hence. It compares a farmer’s financial performance against their individual historic trendlines, against their forecasted performance, against industry standards and against a peer network of farmers who participate in the model. The forecast becomes the farm’s baseline financial performance from which different scenarios are tested to determine how performance can be optimized.

Licensed consultants (Backswath Consultant Associates) work in a franchise-type relationship with Backswath, using tools and resources that provide the same services as the parent company. The model provides services online, as farmers can access resources and information in an electronic relationship, supporting in-person meetings that typically occur at the farm.

Backswath assists farmers in aligning and managing three key relationships in their businesses:

identifying the vision for their farm and family
establishing financial targets and investment guidelines
creating the management structure (governance) to support the business
Backswath services
Business Continuity

Virtually everyone who is involved in agriculture is aware of the challenges farms and farm families can encounter when contemplating succession. The traditional approach to succession planning takes the family situation, integrates it with tax and legal considerations, to develop the plan. In contrast, Backswath Management takes a business-first approach and tactically integrates family communication, strategic direction and management transition with tax and legal strategy development. The underlying principle is that a successful business is easier to transition.

Backswath Management uses a step-by-step approach with options tailored to meet the specific needs of the farm family. The farm family, in discussion with a Backswath Consultant Associate, determines when their plan needs to be completed and ready for implementation. Once determined, a step-by-step schedule is established that ‘works back’ from the plan completion date to the commencement date.

The Backswath approach includes three phases: readiness assessment, plan development, and implementation. It focuses on the process rather than completed technical documents.

Structured and active communication, facilitated by a Backswath Consultant Associate, is designed to ensure that all stakeholders have an opportunity for input and remain informed.

Growth Management

Farms are increasingly large and complex. The key to a successful operation does not lie in any one area of farm management. Operational efficiency and sound marketing is important to success of the farm. Attention to, and prudence in, financial management is also important. Sustained success is measured by the ability to keep these and other management functions in relative balance as the business grows, and becomes increasingly complex or perhaps transitions inter-generationally.

To support this, Backswath Consultant Associates work with farm families and farm business stakeholders to align personal, family, and business goals and strategic direction within a framework of established financial targets, defined investment guidelines and balanced management functions.

Backswath Management provides ongoing assistance with implementation, evaluation, and adjustments.

Peer-to-Peer Networks

Farmers are eligible to participate in a Backswath Aggregate Network for purposes of performance benchmarking (financial and managerial), given a Backswath formalized Growth Management or Business Continuity engagement exists.

Participants are then subsequently placed into Peer-to-Peer Networks for purposes of collaborating on management and business issues. The Peer-to-Peer Networks, consisting of up to 20 members, will be carefully formed, considering geographic location, age, and sector.

Aggregate and Peer-to-Peer Networks participants must continue with annual, ongoing Backswath Growth Managed Engagements to maintain membership. This will ensure the Aggregate Network and Peer-to-Peer Networks maintain a standard managerial and financial application and represent a homogenous group of peers.

Realizing farm growth

“For today’s farmers, managing growth is significant,” Betker explained. “What comes with growth is the inherent drive to achieve economies of scale both from a human resource and capital investment perspective. In the last four or five years, agriculture is a good place to be. [Farmers] see it as opportunity and they are growing.”

Moving forward, the challenge that continues for Betker is helping farmers understand the benefits farm management consultancy brings to their businesses and how it can be used as an effective resource. But, after so many farmers have experienced the successes of management consulting, there does appear to be more of a readiness to embrace this unique concept.

Terry Betker is the Canadian representative to the International Farm Management Association (IFMA). Canada will host an IFMA Congress in 2015.The IFMA is a society involved in global agricultural processes with an interest in building farm business management understanding and practices.