Top Ten Percent
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‘Aim to be the top 10 percent of any industry and you will do well,’ advises Tom Smith from Yarrawalla in north-central Victoria. Supported by wife Val and their children, the Smith family has transformed a traditional family farm into five companies that employ over 40 full time staff to care for 2,000 sows and their piglets. By milling and mixing all their stock feed, they have complete control from farrowing to finish.
As pigs were always a small part of his father’s mixed farming activities, Tom was familiar with caring for them as what is now seen as in a very primitive way. When he and Val married in 1971, a $40,000 loan was sought but rejected by the bank at the time. Rural Finance also rejected the application suggesting it was too big of a risk. Fortunately, the family were supportive.
With keen business intuition and a willingness to experiment Tom’s dad took full advantage of any assistance on offer. Purchasing of the pigs was funded with the assistance of a stock agency veto over stock. Fortunately for the Smiths, Gippsland was experiencing a bumpy year in drought terms, so they were also able to increase cash flow through hay sales and establish their new business with 100 sows.
‘Oddly enough,’ Tom reflects, ‘several years later with the piggery functioning, we applied for a loan to Rural Finance, and they knocked us back because we were in a good enough position to borrow from the commercial banks.’
The government at the time also saw pigs as a potential industry and invested considerable dollars through the Department of Agriculture. 'This benefited us enormously, says Tom. 'Department staff helped us to select breeding stock; they had an engineer on staff to design shedding, nutritionists to assist with the feed formulations, absolutely top veterinarians, pathologists and field officers. It was an incredible time of development. The industry has been very good to us.’
In 2016 there was an estimated $8 million of capital improvements on the books indicating that the Smith family don’t do things by halves. ‘There has never been a time where we have said we want to get bigger,’ admits Tom, ‘it has just evolved. All increases have been about improving.’
It also goes without saying that a lot of hard work and sacrifice helped their business to ‘evolve’. Val has worked right from the beginning in the farrowing and training areas of the business and says that she learned to ask ‘lots of questions’.
Their children were brought up to be independent. ‘They got themselves ready for school, made their own lunches and beds from prep year onwards,’ Val explains. She would leave the piggery in time to take to them to school bus. ‘Life was a lot simpler for families back then. Kids entertained themselves.’
‘They were great kids and very dependable,’ agrees Tom.
Instilling strong work ethics has had positive outcomes for their now adult children. Their sons, Jarad and Caleb, are actively involved and buying a portion each of the business while daughter Jeannie and her husband lease the land and farm in their own right. Another daughter, Kellie, is a veterinarian and part owner of a practice in Eaglehawk.
Attracting good staff was a major challenge as their companies expanded. In 2010, Tom advertised in the Manilla Times attracting four quality staff and making a significant difference. They now have 22 workers from the Philippines on their books.
‘Working with pigs is a chosen career path in the Philippines,’ explains Tom. ‘Although not quite at a formal Australian veterinary standard, they are well educated in this industry and have a positive attitude to their work.’
As the business and family has simultaneously grown, succession planning has always been at back of the mind for Tom who wanted to find a better way than what he experienced with his father and four brothers. A partnership with one brother and his father existed until 1994 when it became time to move in different directions. Tom took on the piggery and the other brother took much of the land previously owned by their parents.
‘For succession, my dad’s idea was an insurance policy to cover the payout on his death with my brother and I paying the premium,’ Tom explains. ‘The property was valued and that value divided into five and the value increased equivalent to CPI each year. Upon reflection I think it would have been better settled when my brother and I first took control of the farming activities.’
‘All along Val and I have told our children that there is no such thing as an inheritance,’ says Tom. ‘Kids in this day and age are in a much better position to earn more.
Having said that Tom admits that they have already given the kids what they are to get of their inheritance. ‘It was easy to do. The returns (lease payments) on what the boys haven’t paid for on our death goes to charity until purchased entirely. As a future owner of the company you have to be active in the company,’ he adds. With the saying “three generations from riches to rags” in mind, Tom’s theory is that you will always have a second generation if the potential owners have to commit financially and be active in management.
One of the best decisions Tom claims he made of his career was the setting up of an advisory board providing Tom, Val and the boys with an outside perspective. ‘It was important for us to recognise the strengths in the boys and give them freedom to speak their mind, not just be a father son relationship,’ says Tom who is also clear on his role as he starts to contemplate retirement.
No doubt the transition from a family farm partnership into a more complex company environment that includes Kia-Ora Piggery, Kia-Ora Breeding, Walla Environmental Solutions (waste products), Sixth Gralloch Holdings (employment service company), and Goldfield Pork (wholesaling pork), hasn’t been without its bumps and challenges, both financially and emotionally. Fortunately, Tom’s history of making good decisions has stood them in good stead.
In 2009/10, despite the pork industry shrinking 30 percent while Tom and Val were investing millions of dollars, they managed to retain the confidence of their bank manager. ‘It is extra tough when pork prices are down and grain prices are up,’ says Tom. ‘This has happened on several occasions, making it tough for all producers.’
A firm believer in utilising whatever is available to you, Tom has put SPC Ardmona waste products to good use, feeding the contents to the stock and recycling the tin. This required over a $1 million investment to set up the process, however, 18,000 pallets of tins over 18 months recycling up to 50 tonne a day has made it worthwhile.
Always keen to innovate, Tom’s latest project is the installation of a bio gas system to take advantage of the huge amounts of pig affluent generated onsite. Impressively, it has the capacity to reduce greenhouse emissions by 81 per cent and generate more than 115 per cent of the site’s electricity needs, with the excess potentially being sold into the power grid as a greenhouse gas offset.
A touch of competitiveness has encouraged Tom to take up benchmarking opportunities along the way. Thanks to their hard work and diligence, today the Smith family are a competitive player in the pork industry and ranked within the top three of their industry.
Tom’s top business tips:
- Aim for the top ten percent of any industry.
- Have a vision.
- Utilise any resources available to you including professional advice.
- Communicate openly and often.
- Your staff are your biggest asset. Care for them and they will care for you.
- Organise your succession, whether with your family or even top managerial staff early in your business path. The sooner the easier with family. They then know what to expect.
KERRY ANDERSON: Author of ‘Entrepreneurship: It’s Everybody’s Business,’ Kerry works with small businesses and rural communities to help them embrace new opportunities. READ MORE http://www.kerryanderson.com.au/about/
