Life…Another Cost to Manage

“Despite the high cost of living, you’ll notice how it remains incredibly popular.”

We enjoy many benefits from living on the farm. So many are intangible: peace and tranquility, open
skies, fresh air, etc. Many others are tangible: be your own boss, grow your own food, continue a family
legacy, etc. Then there are those benefits that are measureable but rarely measured.

Any farm business doing even the slightest degree of cash flow analysis must give full disclosure on
personal expenses paid by the farm. There, I said it.

We all know that the farm pays the power, heat, taxes, and maintenance on the house; it buys the
vehicles, insures them, and put fuel in them. These are legitimate business expenses, whether it be a
portion of each or the entire cost. The point is, “Are you measuring it?”

This hits home for retiring farmers who are trying to calculate how much they need to live on in
retirement. Many of them are not used to paying for all of that, and more, from their personal
income…and all of the sudden they realize that CPP and their RSPs are barely adequate (if adequate at
all.) Interestingly, the intention of gifting the farm assets to the next generation isn’t as likely unless
mom & dad are going to frequent the food bank in their golden years.

Farmers that are paying themselves a salary, wage, or dividend from the farm and are truly paying their
personal (as in “non-business”) expenses from that personal income already have a clear grasp on this
concept. They understand the “pay yourself first” mantra and won’t be surprised at just how much it
costs to live when they transition out of farming.

 
I’m not saying that you must discontinue letting the farm pay for personal expenses; after all, it’s your
business. What I am saying is that you must measure it; you must know what that number actually is on
a monthly or annual basis. Picking a number that you “think” is close is not sufficient. Knowledge is
power; estimating is risk.

Direct Questions

Have you calculated how many personal expenses are paid by the farm? If not, why not? Saying that you
don’t want to know is not an acceptable answer.

If you are measuring it, what are you doing with the information?

From the Home Quarter

As a business owner, you have every right to operate your business how you see fit within the confines
of the law. But if you truly want to measure the level of success your business enjoys, this is one more
metric that must not be ignored. If you are afraid to know just how much you are spending personally,
that’s even MORE of a reason to do this, not less. In an era of tight margins, don’t we owe it to our
business, and ourselves, to manage every dollar appropriately?