Andrew DeRuyck always knew he wanted to be a farmer – which is why he started off in banking.
“One of the main reasons I wanted to work in the financial industry was because I believed there was some sort of magic number in farming – that you had to have 300 sows or 75 cows or 3,000 acres and that was the farm that made money,” says the 38-year-old Manitoba farmer.
To his surprise, DeRuyck discovered the opposite was true.
“There were people in the hog industry who made money and there were people who lost money,” he says. “Same for the grain industry and even in dairy. There was no magic number.”
The common trait linking the successful farmers he met was anything but magical. They were the ones who brought cash-flow projections when they came in to apply for a loan and could say precisely when they would draw most heavily on their line of credit, and how much they expected to draw.
“They knew where they were going and that’s what made me realize the importance of doing these numbers,” recalls DeRuyck. “I asked a couple why they put in this effort and they said it allows you to get out of trouble sooner and to handle more risk.”
He wouldn’t fully appreciate the wisdom of those words until BSE struck.
Even before he went off to university (where he’d meet wife Tanis), DeRuyck knew he wanted to buy the family farm at Mariapolis in southwestern Manitoba. He also knew he’d never accomplish that solely by working off the farm, even though he earned a good wage working the financial sector. He decided he needed to build equity and although he started small – with just five beef cows – he had a plan.
“It was a joint venture – I kept cows at my parents’ farm, traded equipment use and feed for labour, and grew my herd from there,” he says. “By starting a business on the side, I could grow my equity because I had expenses that I could write off.
“Then once I went farming fulltime, I could write off all my losses against my off-farm income. Luckily I figured that out early in life.”
For four years, DeRuyck juggled two jobs. Each evening, he would leave his office in Killarney, drive 45 minutes to the farm, trade his suit for a pair of coveralls, and put in a second shift doing farm chores. By 2000, he was flat-out exhausted, but the five cows had turned into 100, and he had enough equity to go farming fulltime.
And all the while, he still found time ‘to do the numbers.’
At first, it was just a few spreadsheets. The cash-flow statement was key and it was linked to the one that stated his opening net worth, his anticipated net profit (including the income tax refund his farm expenses would earn him), and his closing net worth. It was all pretty simple.
“To buy five cows, you don’t need much of a business plan,” DeRuyck says with a laugh.
But as he added enterprises such as grain growing and custom seeding, the plan grew. When he became a fulltime farmer, DeRuyck added what he calls “verbiage” – writing down the goals he set for himself in terms of building net worth, marketing, buying his parents’ land, and so on.
This was not a plan that sat on a shelf. In fact, DeRuyck doesn’t even print it off as he is constantly updating it to account for the latest purchases and sales. And as he updates his numbers, he can see instantly how that affects his profit, net worth, and operating loan.
“The written business plan forces you to look at the numbers,” says DeRuyck. “That’s the best part. Because it’s a living document, you’re always reviewing your cash flows and your projections. So it really forces you to know your numbers.”
Which is why DeRuyck had no place to hide on that day in 2003 when he turned on the news and heard an Alberta cow had tested positive for BSE.
“Of course, I immediately knew that I was going to be hit,” he says. “But when I re-did my cash flow I had a pretty precise idea of how big it would be and when I would really feel it.”
It’s obvious why DeRuyck calls this a critical time in his farming career. But it’s not so clear why having a written business plan was so important. When you’ve been blindsided by fate, what difference does a business plan make?
DeRuyck says it changed his life because, as his former clients used to say, it allowed him to “get out of trouble sooner.” He had been kicking around the idea of using his background in finance to start a consulting business. As he looked at his business plan and the damage wrought by BSE, he decided the time had come to act.
“I started looking right away. I found this contract on the Internet but, as it turned out, there was only a short period – six weeks, I think – in which you could apply. So if I hadn’t been looking right away, I would have missed out on that opportunity.”
The opportunity was a federal program called Canadian Farm Business Advisory Services, which offered farmers five days of consulting services (worth $2,000) for just $100. Fittingly, recipients received a financial assessment (including a net-worth statement and cash-flow plan) that is central to a business plan.
The contract brought in his first clients, and DeRuyck has never looked back. He has since partnered with another farmer, Mark Sloane, and business for their company (Right Choice Management Consulting) is so good, he opted to sell his 275-cow herd in 2007 and focus on grain farming and custom work during the growing season and consulting in the winter. Again, the business plan played a central role. Four lean years post-BSE meant DeRuyck’s reference margin under the Canadian Agricultural Income Stabilization program was so low, it no longer afforded him any meaningful protection.
“It was really about risk management,” he says. “It was going to be our money we’d be losing if prices didn’t improve. As well, the consulting business had grown considerably since then and I had largely reached the target I had set in terms of building equity.”
Today, the DeRuycks crop 1,400 acres and are content to stay around that size. The focus now is on maximizing the net profit from those acres, and the business plan is the tool for achieving that.
“When I’m busy with seeding, I don’t look at it very often,” he says. “But in the winter, I’m probably looking at it three times a week.
“Often that’ll be when I’m watching TV. If I’m surfing the Internet and come across a cheap combine, I’ll plug that number into one of the spreadsheets and see how it plays out. But that’s just me. I’m just curious about what it would look like.”
Business plans tend to be as individual as the people who created them, says DeRuyck. But the key to making them work isn’t what’s on the page or computer screen, but what’s inside the heart, he says.
“You have to know what you’re trying to accomplish,” he says.
“My goal was to buy the farm at fair-market value from my parents. So the projected net worth at year’s end isn’t just a figure in a spreadsheet – the goal of building my net worth is important to me. That’s what drove me.”