Farm Succession is topic overlooked on many Farms

 Farm succession is the most important yet most undervalued or thought through plan that is developed on many farms.  Often the lack of planning stems from the dislike of confrontation, the potential to alter relationships or a concern about future retirement needs, etc.  If you hope to have your farm succeed with the next generation of family members or others, make sure you have the right structure in place – and set it up now not later.

If you don’t set up the plan correctly there can be huge financial or relationship costs or even needs to sell the business/land to cover fees, expenses and other items. I am going to focus on a couple of the foremost issues you may want to think about.

  1.    Start the succession process while the next generation of farmers is still young.

Successful farm succession sometimes starts from the belief that farmers do not own the farm, they are truly the caretakers for the next generation.  There can be a strong sense of pride and fulfillment to realizing that you have this opportunity and can still make a livable income or supplement another career while caring for the business. 

While developing a caretaker attitude the next generation needs to realistic about the psychological ownership of a farm.

The next generation needs to understand how to care for the farm, the family, employees, relationships and everything around that operation the livestock and the crops.  They also need to fully understand that if the business climate changes and the farm business cannot be maintained with out substantial changes they should not hold themselves solely accountable.  The pressures can be intense and sometime psychologically challenging.

 

2.    All interested parties need to understand the financial side of the business.

Full or part time farms may lack an accurate budget or not have ability to accurately follow how changes in the business model may truly impact the bottom line.  Operating with a budget which is analyzed regularly can help reduce everyone’s stress level and assist in planning for the future development or succession of the farm. Accrual financial statements can help you know your costs and monitor your actual costs against a budget, so you can adjust accordingly.  The consideration of implementing accrual accounting could be a major help.  Take time to talk to a experienced farm CPA for more information or how it may help you.

3.    Play to people’s strengths, even while they’re still youngsters.

If there is more than on member of the family expected to take over the farm business in the future, consider how to equip each person according to their talents and abilities.  Every member of the team brings in difference sill sets, aptitudes or abilities they bring to team.

Become a partner coach by providing training and coaching.

 

4.    The next generation only truly learns from a combination of responsibility and accountability.

“If you want something done right, you have to do it yourself” or “This is the way you do it” are statements put into practice far to often on many farms. Many times, it is because there’s a lack of trust that the job will be done the way the current generation wants it done.  The next generation may develop an improved way to accomplish the same task or reach the desired endpoint.  The older generation may look at it as a time-honored tradition or have other reasons to object to change however it could be looked at as using your resources wisely.

Start with small steps and build upon them, set some benchmarks.

Delegation begins with clear communications about what you expect and how you’ll determine whether the expectation is met. Great communication is the key to reducing frustration in the operation and becoming working partners with family members or employees.

 

5.    Understand that a succession plan is not linear. Adapt accordingly.

Understand that there will be changes in the plan of succession for your farm, so adopt an attitude of flexibility and review the plan to make sure that it still fits the scenario from time to time.  The plan and the thought process need to be agile and adaptable to changing internal and external factors.