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Knowledge and practices for business resilience

Update, October 2020: Sarah Silva of Green Star Farm is a member of the Bay Area Ranchers Cooperative (BAR-C). The group of nine ranchers is working together to establish a mobile harvest and cut-and-wrap facility in Sonoma County. It’s an important alternative to the 150+ miles that they currently drive to access those services. The cooperative has launched a WeFunder campaign seeking to raise investments in the project, with key goals set for October 31 and December 31. This project is a really important development supporting the Bay Area’s access to locally grown and processed meats, and we encourage you to learn more!

California FarmLink has a new farmer/rancher professional development course called the Business Resilience Intensive. It covers a core curriculum including business structure, labor, accounting, taxation, cash flow and credit, insurance, environmental regulations, legal aspects of food safety, and overall business planning. The course begins with a self-assessment, and ends with each participant receiving one-on-one coaching on how to develop an action plan to address the weaknesses identified in the self-assessment and to accomplish specific goals they set during the course. The most recent Intensive served North Coast farmers.

Sarah Silva of Green Star Farm was one of the first participants in the Business Resilience Intensive. Sarah operates her farm on 85 acres in Sonoma County. She’s focused on pasture-based livestock, including eggs, chicken, pork, lamb, and goats, and direct sales with CSA-like online orders. Reflecting on the course, Sarah said, “There were a lot of things going on for me at the time. I was buying out the folks I’d been working with and becoming the sole owner of the farm. So I just felt like it was a good time to be looking at things deeply.”

Sarah valued the course’s focus on ownership structures and their legal and tax implications. She reported that, “In hindsight, I had no idea how much this would prepare me. And I think the reason that the course is so amazing is because it’s about resilience. It helped me be prepared for all the many changes in circumstances that we encounter in our field.”

Sarah has run other businesses in the past. When starting her farm she was not new to accounting and she based her books on the IRS Schedule F for reporting farm income. After the course, she reported, “I thought I had a really good accounting system, and it was good, but not in a critical way that helps me adjust quickly. One thing that the course really motivated me to do is to separate out things that are just farming. A lot of us farmers don’t do that.”

Along with others who took the course, Sarah feels that it will give farmers a new perspective and the ability to make more money and be smarter about it. Another farmer commented, “It gave me the confidence and skills to be a savvy business owner that understands California rules and regulations and can engage in long-term planning.”

The course topics are organized in a framework based on a holistic farm business structure developed by Poppy Davis, FarmLink’s program consultant. Poppy works with FarmLink to help farmers understand their businesses through the framework of people, land, and activities.

“It’s a foundational perspective,” Poppy told the farmers in the course earlier this year. When looking at farm or ranch businesses within this framework, growers begin to better understand how to think about people, land, and activities as distinct legal and financial elements that come together in the farm/ranch business plan. Crucially, it also helps growers to separate personal activities from business activities. Some of the first questions in the self-assessment: Who owns your business? And if there is more than one person involved, do you have or do you plan to make a written partnership or operating agreement? The assessment continues by addressing legal and tax liability and other considerations that are affected by how the business is structured.

Separating business and personal activities is crucial, Poppy emphasized, “It means adding some formality to the steps of taking money out of the business. You don’t do that on a random Tuesday to buy a pizza, but you do it every Friday, and in round numbers.” For many farmers, establishing and maintaining these routines can be a challenge, but it’s vital for long-term success. To help the participants establish and embrace their accounting, Poppy encourages farmers to focus on developing their own ability to read and understand financial reports, but also to hire a bookkeeper to help manage the timely and accurate entry of daily transactions. “Some of the oldest records of human civilization have to do with accounting,” she stated, “This is the essence of humans actually being just enough ahead of the game to not be at starvation or subsistence.” We never hear a farmer regret having hired a good bookkeeper; and for some small-scale farmers, it may be a family member’s contribution to the business.

At its core, FarmLink’s work on business resilience is focusing on a farmer’s ability to manage risks and changes, and ultimately to prepare thoughtfully for succession and retirement. Poppy encourages farmers and ranchers to start thinking about the long term as soon as they can stabilize current operations. The sooner a farm or ranch starts to invest in the types of assets and strategies that will facilitate succession, the more likely they will be able to accomplish their long-term goals, either to keep working but with decreased physical demands, or to retire comfortably.

Unfortunately, many farmers and ranchers do not think about retirement until it is upon them, and it’s not uncommon for them to find they cannot begin succession planning until they go back and create the basic business structures we cover in the Business Resilience Intensive: an entity that is legally distinct from the owners, written lease agreements, strong bookkeeping systems, the ability to understand the balance sheet and the income statement, appropriate insurances, and systems to manage applicable regulations.

Throughout this often decades-long farming trajectory, we urge farmers to maintain and learn from their balance sheets. As Poppy explained in the course, “It’s too easy to get caught up in the daily operations, and you are probably doing a pretty good job of keeping track of sales and expenses, but are you keeping track of the big picture? How are you doing on overall cash savings? How are you doing on debt management? What long term assets have you built or purchased?” At the heart of the course is a unit on cash flow budgeting and how to use credit effectively. The ability to budget cash flow allows farmers to determine if the business needs operating credit, or if it can afford to invest in long term assets such as equipment, infrastructure, or farmland.

Look for California FarmLink to share our Business Resilience Intensive with more communities of farmers in the near future.

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