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

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:

1. 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.

2. 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.

3. 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.

4. 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.

5. 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.