Final report for FNC16-1052
In 2016-2017 a group of 7 farms (13 farmers) in Southwest and Southcentral Wisconsin met a total of 7 times to discuss various financial aspects of running a farm and farm related business. The operations were very diverse and included vegetables, apples, hard cider, on-farm entertainment, grass-fed beef, small grains and CSAs. The objective was to come together as a group under the supervision of professionals in finance and learn financial literacy and other related skills. Although the project has ended, the group is continuing into 2018. We have plans to meet with a retirement planner as well as a session on utilizing social media more effectively. The results are well documented in a before and after survey depicted in graph form in the results section as well as individual write-ups of each farm explaining what they learned from being a participant in the project. Not only did all the farms have real changes to their operation based on the project, but we all became each others support systems for a number of topics. For example, Marie has helped talk many in the group through government cost share programs, Rami has helped Marie and Beth improve apple growing on their farms, and others have gained the confidence to take out the loans they need to grow their business in a profitable way.
All farms have purchased all hardware and software specified in the grant. Fearless Farm Finances and SARE's Building a Sustainable Business: A Guide to Developing a Business Plan for Farms and Rural
Businesses have been supplied to all participants. Marie, Lauren and Eric have hosted meetings.
Prior to the first meeting in July a survey was developed and sent to the group to measure baseline knowledge, attitudes and behavior surrounding financial terms, level of comfort in making financial decisions and overall financial literacy.
Overall, the survey shows that there is variability within the group depending on the subject. Taxes in general seemed to be an area where most people in the group had little to no confidence. It also seemed as though people may understand certain terms and how to create financial documents, but lack the understanding to analyze their unique situation.
In addition, an open ended question was asked at the end of the survey. Responses are given below:
"Get a handle on the basics of financial management for our farm. Understand how to think about and fund investments. Start towards a point where we feel confident enough to file our own taxes"
"As we start our small business I want to avoid making financial mistakes that are avoidable. I want to feel confident when talking to bankers, lenders and investors and ensure that I am making the most educated decisions possible"
"...More of the day to day financial management aspects [of farm financials]"
"A clearer picture of where the farm needs to go financially to support our family, allow my husband to quit his job and join me in making our income from the farm in various ways"
"Find out if I need cash flow and balance sheets. Also, the ability to evaluate different farm enterprises for profitability"
As the meetings continue with various experts and advisers throughout 2017 we should be able to answer these questions. Already, farmers have expressed gratitude and further understanding of financial terms.
Before writing the grant I discussed topics with several of the farmers as well as several professionals involved in the project. During the course of the project, as the participants became more comfortable with their own finances they started requesting specific meeting topics. I think with this sort of project it is important to understand that there will be diversity in the group and being flexible with the plan is important. For example, we had not planned on doing a session on payroll, but as the year came to an end several farmers wanted to make sure they were doing payroll correctly. I was able to find a free resource in SCORE and set up a meeting. The group still plans on getting together to talk to a retirement specialist as well as a session on how to best utilize social media.
Generally, the group has already become more proficient in general financial literacy, as is displayed by the questions and dialogue during the first 3 meetings. Several of the farmers have stated that they already feel more comfortable talking with FSA loan officers, their mortgage holders, and their banks about financial issues. Once the meetings have finished at the end of 2017 it will be interesting to see how individuals confidence around financial issues has improved.
Update: 4 additional meetings were held in 2017, as described below. We have plans on meeting at least twice in the coming months to discuss retirement planning and use of social media.
The group met 7 times, as scheduled, but changed the order of the meetings slightly to take advantage of the tax preparation meeting before the end of the tax year. This switch allowed the farms to compile their earnings and losses before the end of the tax year, giving them time to make any adjustments recommended by the tax adviser.
In the first meeting Paul Dietman provided a detailed review on balance sheets. Prior to the meeting each farm completed a balance sheet to reference during the meeting. Not only did Paul explain how to complete a balance sheet, but also how he, as an adviser, uses balance sheets to draw conclusions about a farms financial status. On the outset I think most of the group thought they understood a balance sheet, but as the meeting progressed it was obvious that there were intricacies that required edits and further understanding.
The second meeting built off of what was learned in the first meeting and expanded into monthly and yearly cash flows and cash flow analysis. Again, Paul walked the group through the detailed cash flow example that he provided as a starting point. As each farmer is in a different place in business development, we were all able to share how we as individuals managed to cash flow (or not!) our businesses and farms. It was most interesting to learn how personal, or what we thought of as personal finances can get mixed into cash flows, as opposed to balance sheets which are much more farm focused.
The third meeting was meant to prepare the group for tax season and hopefully stave off any unforeseen tax liabilities prior to year's end. This was a lively discussion in and the around the schedule F and the schedule C as it relates to the standard 1040 tax form. With focus on depreciation, various forms of incomes and expenses, as well how to classify certain expenses and incomes, this discussion generated more questions then could be answered in a 2-hour session. Many, if not all the farmers in the group are going to be taking advantage of the grant funds available for individual consulting sessions with tax advisers and accountants. Although the group is diverse, many of the tax strategies are useful for all types of production. It was also interesting to hear how others have dealt with tax liabilities in the past. The session also brought to light how each tax adviser may interpret tax laws differently. It was this realization that made it all the more important for individuals to understand how their taxes are done and have the financial literacy to ask the right questions of their advisers.
The fourth meeting took place at Badgerland Financial on February 7th 2017 to give the group an introduction and training into using Quickbooks software to track farm costs and incomes as well as payroll. In addition to the group training, funding is provided to each farm to get individual training from the consultant of their choice in Quickbooks.
The fifth meeting, July 14th 2017, focused on grants, investment strategies and capital investments. We were extremely fortunate to have Tera Johnson from the Food and Finance Institute come to the meeting as we talked about capital investments in local food companies. Paul and Tera walked the group through what it takes to approach a bank for a loan, what kinds of loans are available and how to best finance farm and food manufacturing companies. Everyone walked away from this session inspired and confident in why investment is so important.
The sixth meeting, October 6th 2017, was a hands-on meeting where we looked at 2 large building projects different members of the group were working on financing. Paul helped the group run through a real Return on Investment on a Pack Shed for a CSA and an Apple Pressing Facility on a small orchard. Both farms are deciding what kind of loan to apply for and from where, either FSA or a traditional lender, and why.
The seventh meeting, November 20th 2017, focused on payroll in Wisconsin. The group met with a representative of SCORE at their office in Madison. They went over the specifics of hiring, what forms need to be kept on file as well as how to create a spreadsheet with formulas to calculate withholding for each employee. The SCORE representative also went over when to file and pay witholdings at both the state and federal level as well as providing employees with all required paperwork at the end of the year.
The final meeting in early 2018 will be a wrap up and reflection on what we learned, what worked and what we would change about the project or suggest others do.
Educational & Outreach Activities
I briefly presented at an "In Her Boots" MOSES workshop on July 12th at Brattset Family Farm in Jefferson WI. The day was focused on women farmers and I was able to use some time to talk about SARE Farmer Rancher Grants in general as well as our specific project. Another participant in my project was also at the field day and was able to talk about how the project has helped her as they start their farm.
NCR-SARE toured our farm in July 2017.
Individual farm write-ups were prepared and printed for the MOSES conference in February 2017. Print-out will be available to download from the final report.
What I learned from this grant was somewhat 2 sided. It made me more confident in my financial decisions and my literacy in financial terms, but it also humbled me to not be afraid to ask for help. Often, entrepreneurs feel like they have to go at it alone, or do everything on a shoestring. The past 2 years, as my business has grown substantially, I have learned that asking for help and paying for services is often the most financially responsible route to take. Running a business forces one to become a jack of all trades, but as the saying goes, you can be a jack of all trades and master of none. Several participants mentioned throughout the course of the meetings that they would like to have the ability to step away from certain aspects of the business. Specifically, things they do not enjoy doing or are not efficient at completing. The tools we were given over the past few years allow us to analyze what tasks within our specific business can be hired out without compromising the integrity or financial well being of the farm or business.
The advantages of a project like this is that it can easily be replicated with very little funding. I do feel like the group would need a pro-active leader to ensure the longevity of the project. It does take a substantial amount of time to schedule and find resources in the area, but once one feels comfortable asking for help and advice, it becomes easier and easier to find resources. In some ways, starting the group with someone like Paul Dietmann or a local Small Business Development Center advisor starts a snowball effect of resources. More often than not, even people from the private sector may be willing to help a group such as this in the hopes that it would bring them additional business. The advantages of starting a group like this is that it not only builds financial literacy, but it also builds community. I believe that many of the farms in this project will stay in touch directly, but I can also envision the farms breaking off and starting separate groups with a more specific purpose. For example, I know two of the farms in the group are considering sharing a delivery truck and employee to cut costs and time of delivering vegetables to restaurants. They now have the tools and confidence to run the numbers on a partnership like this and evaluate specific monetary and lifestyle outcomes. Additionally, two other farms have already paired up to share a common processing resource.
I would absolutely recommend others to embrace this model of learning. It could be applied to many aspects of running business, not just financials. Collaborative learning is not a new concept, but with the advent of the internet, face to face collaboration has declined. As small communities continue to lose strength in their social fabric, collectives of small businesses supporting one another will become vital in preserving the resiliency of the rural community.
I hope SARE farmer Rancher Grants continue to get adequate funding from USDA. They are so important for building farmers' confidence in grant writing and experimenting on their own farms. It is important to allow farmers the flexibility to try new practices by mitigating the risk with a grant. Farmers tend to be very risk adverse, but have these small grants available to off-set that risk is really important. Not everything can be researched by the Universities, and farmers and farms are so diverse that individual experimenting is important.