Greenhouse Canada

Business Management
It’s February 2008 – do you know what your financial results are?

February 20, 2008
By Wendy Santoro


The agriculture sector is faced with a great number of uncertainties and yet, is still evolving, growing and performing well, though not at record levels.

The agriculture sector is faced with a great number of uncertainties and yet, is still evolving, growing and performing well, though not at record levels. With the evolution to a global economy, the industry faces new market challenges such as:

  • A strong Canadian dollar
  • Fluctuating energy prices
  • Increased input costs
  • Advanced distribution models
  • Inflexible market prices.

This environment has become a well-known reality. And, although a reality, these factors still create unease among greenhouse growers and lenders. However, with a proactive approach, growers can reduce the losses and improve profitability, which will provide a level of comfort to the lender. Some of the areas to consider are detailed below.


  • Implement tight control over all input costs. Focus on all costs, not just the larger ones.
  • Invest in technology in order to reduce costs and improve quality and yields.
  • Develop new products to differentiate yourself from competitors.
  • Monitor the business by using advanced business software in order to ensure that key performance indicators are measurable and issues are addressed on a timely basis.
  • Take full advantage of government programs.
  • Develop and execute a strategic and financial plan.

By embracing a proactive approach, when the financial results are submitted to lenders/stakeholders in accordance with the lending agreements, the lender will understand the level of support required. Many growers will be seeking further financing to support cash flow deficiencies during the growing season. As a result, it is important that current financial results and projections are presented anticipating the lenders’ questions.


In an industry in which financial uncertainty has become reality, it is important to put your ‘best foot forward’ when providing financial results to other stakeholders. When preparing for the discussion with the lender, there are five areas to address.

Surprises: No one likes unpleasant surprises. Yet traditionally, the struggles and financial concerns are often hidden from stakeholders. Generally, it is due to business owners believing their struggles are short-term and that they will be corrected by year-end. Depending on the financial capabilities of the farm, some owners may not even recognize they have a problem.

Previous articles have dealt with budgeting and changing directions in an effort to stimulate the agriculture industry to forecast cash requirements. This is becoming more important as the industry struggles to cover its costs due to economic conditions and market pressures, most of which are outside the control of the grower.

Be prepared:When reviewing your financial results, be prepared to answer questions regarding them with the invested stakeholder. Lenders will want to ensure that their loans are not at risk. Therefore, they will want to review:

  • Current financial results
  • The strategic plan for the business, for the next year at a minimum
  • Projections showing the expected financial results and cash flows over the next one to two years.

Regardless of the financial results, it is better to set expectations at the outset.
Understand and explain changes in financial results: Provide details to support the financial results. If the results differ from the previous year or plan, explain why the differences occurred. For example, if sales have declined due to a change in exchange rates, then quantify the extent of this change. This will provide the stakeholder with the information necessary to evaluate the results.

Strategic Plan:A strategic plan provides a road map of where you want to be and how you are going to get there. It is not necessarily a lengthy document, but it demonstrates commitment and focus, which translates into confidence from external stakeholders. As a grower, there are many factors to consider in a strategic plan. Obtain the expertise needed to define and measure this plan that will drive and influence long-term results.

Projections:Regardless of financial results, it is crucial to formulate the strategic plan and the related assumptions, and project the financial effects on operations in order to validate the plan. Compare actual results to the plan on a regular basis. The plan should not be stagnant, but an ever-evolving process in order to chart a course to success.
In summary, aspects such as weather, exchange rates, energy prices or market rates cannot be controlled – that’s a given.Strategies need to be put in place to mitigate those risks. Production, yields, quality, development of new products and markets and some input cost can be controlled – that’s a given. As such, implementation of a plan to measure, monitor, adapt and innovate is necessary in order to ensure success is within reach.

Wendy Santoro is a senior manager with the financial advisory group located in the Windsor office of Deloitte. 

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