Our aging population and its associated economic concerns are not news. We’ve known for a long time the silver tsunami of baby boomers would present numerous challenges, at every level of society, but especially where SME business succession is concerned.
There are approximately 1.2 million baby boomer owned businesses in Canada with a total enterprise value upwards of $1.5 trillion. On average, these businesses account for an astounding 40% of a city’s economy so their successful transition between generations is critical for community economic survivance. Tsunamis – even figurative ones – aren’t exactly gentle events.
In thinking about the future of the Canadian economy, we must also think about Canadian farms. They are after all, lucrative (often family run) businesses. As of 2020, agriculture and the agri-food system generated $139.3 billion or 7.4% of Canada’s GDP. In 2022, the average age of farmers is about 55 and according to a New Farmer Programs report put out by York in 2021, “somewhere between 40 and 80% of farm assets, estimated value $245 billion, are scheduled to change hands in the next 10-15 years.”
The graying of SME owners and farmers are a comparable issue, one threatening not only domestic but global economic disruption. As of 2016, 85% of retiring Canadian farmers did not have a chosen successor and fewer than 10% of farms had a written succession plan.
We’re still waiting on the results from the 2021 Statistics Canada census for updated farm succession statistics but until they’re available, consider how worrisome it would be if fewer than 10% of farms still had no written succession plan in 2022. The world today is a vastly different place than it was six years ago. Farmers are faced with mounting challenges, many related to the pandemic, while others can be tied to growing social concerns and global warming.
Since the beginning of 2020, supply chain disruptions and labour shortages continue to pose problems as shipping constraints and costs – tracked by the Baltic Dry Index (BDI) – remain high with relief not expected in the first half of 2022. For example, “a shortage of shipping containers and truckers and the infamous semiconductor chip crunch limiting new truck production are all expected to [continue to] limit supply growth,” according to FCC.
Consumers everywhere have become acquainted, in one way or another, with supply and demand issues (two words: toilet paper) and farmers are forced to accommodate many of these shifts in demand. For example, appetites for different meat proteins has fluctuated throughout the pandemic and, depending on how inflation and food service businesses continue to be impacted by COVID, are likely to continue to change.
These kinds of immediate challenges are underpinned with consumers’ growing concerns about environmentalism and animal welfare. Calls for more transparency from farmers about their use of pesticides and their treatment of livestock are, in some cases, enticing certain operations to modify their operations and ways of doing business. Related are concerns about how agriculture is going to keep up with increased global demand while dealing with increasingly frequent instances of extreme weather.
All of this is to say farmers face a multitude of uncertainties every day. Adapting, pivoting and staying on top of all these challenges is time consuming and for many, physically and emotionally exhausting, especially as we start to get older.
Succession planning is one way farmers can address uncertainty head on and regain a sense of control. Proactive planning, although time consuming, can serve to alleviate an enormous amount of worry and unpredictability and prevent these interconnected stressors from compounding to natural disaster level proportions.
If you’re unsure of where or how to begin your farm succession plan, and secure your and your farm’s future, connect with us.