Selling the farm

Long-term planning is key to uncorking value of business. Pauline Joicey and Gilbert Provost spent 25 years dreaming of owning a vineyard. The retired civil servants from Ottawa bought land in Prince Edward Country, about 300 kilometres southwest of Ottawa, in 2002, and the next year had a house built on the 4.4-hectare property.

In 2004, the first few vines were planted. By this spring, their goal of having 10,000 vines in the ground will be achieved, Mr. Provost said.

Even though the vineyard hasn't started fruiting to full capacity, the couple now in their 60s, have begun thinking about who will take over the vineyard when they retire for the second time. They don't have any children, and they're adamant about not selling to just anyone who has money.

"We want to have someone take over the operation who would be able to carry the torch of our passion," Mr. Provost said. Fortunately they've found a couple in their 30s who, they said, are interested in buying the property in a few years. "Here, [the vines] are living things," Ms. Joicey said. "It's not just a question that you spent a lot of time with them, they are a living thing that you have developed and it's growing. Someone is buying something that is maturing and is changing." Ms. Joicey and Mr. Provost are lucky to have found the right match, because it's not easy: Retiring and succession planning are the primary issues that independent farmers in Canada have trouble with and seek help with from wealth advisors, said Doug Bruce, director of research at the Canadian Federation of Independent Business.

The key for farmers to retire with money and be comfortable with the future of the farm, is to start thinking about retirement early and to have a properly executed succession plan, which can take up to five years to develop, he said.

Ben Lapshinoff, wealth advisor for ScotiaMcLeod in Barrie, Ont., says succession planning is tied in with retiring comfortably because the farm is often the farmer's primary asset.

"Often, these farmers are sitting on properties that are worth two-, three-, four-million dollars," he said. But throughout their lifetimes, farmers might not be putting aside significant money for retirement because they are more concerned with the day-today running of their business.

"Farmers are effectively small business owners who are taking huge risks between weather, disease, end markets that result in extremely irregular paycheques," Mr. Lapshinoff said. "They don't have a pension, they don't have a large amount of savings. So, It's a challenge."

Mr. Bruce noted it's important for farmers to understand all the government benefits for the industry, such as the lifetime capital gains exemption. The selling farmer will not be charged tax on any lifetime capital gains under $750,000. "I can tell you that for all the tax measures out there this is a critical piece of tax policy for agribusinesses," he said.

Aside from the tax and legal issues, there are what Mr. Bruce calls, "soft issues," such as training and mentoring prospective buyers, that farmers must deal with when looking at retiring. Farmers take a big risk if they don't communicate effectively with everyone concerned. "You don't want the new owner to take over and there be some disgruntled employees who leave. You don't want to loose your good people," he said.

The owners of Redtail say they are well-positioned for retirement. As retired civil servants, they are already living on a pension, and Ms. Joicey said her parents left her a significant inheritance when they died, which was used to purchase the property. The money to build their house came from the sale of their property in Ottawa and all the startup capital for the vineyard and winery came from bank loans.

They caution anyone from the city who is looking to start an agricultural business to find a wealth manager they trust. "You have to have a trustworthy and competent [manager] who will work for you and not strictly for their own profit," Ms. Joicey said. "No major financial decision is made without advice from our business, personal and investment bankers," who helped them with regulation, tax benefits and to create a business plan.

More importantly, they say, people need to realize the agricultural industry is not a place to become rich. After their 10,000 vines start fruiting properly, Ms. Joicey and Mr. Provost say they will have enough to sell about 700 crates of wine at their retail store, which is located on the property. They estimate making about $80,000 in net sales.

"We looked at it in the beginning ... as long as it supported itself. We wanted to pay off the loans that we used to get it set up and continue," she said.

"It's hard work," Mr. Provost said. "It's early morning and a lot of late nights. You're literally married to your operations."

"There's an expression in the wine industry," Ms. Joicey said. "To make a million, you have to start off with two. You won't become rich off it, but that's not why most people are out here."

(prepared by Giuseppe Valiante/Financial Post)