The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Sustainability Test - Part 3
Nov 16, 2011
Today's post is our last part of the sustainability test. Although this is designed for all businesses, most of all of these items apply to farms too.
If a key manager or administrator suddenly became incapacitated, someone other than the owner/CEO could assume his or her duties within a week.
- Have you done a good job of cross-training your employees to be able to step in and do another employee's job in case of illness or extended vacation?
The president or chief operating officer can take a 10-day vacation without checking into the office by phone or email, and business conditions continue to be made.
- I believe that if the farmer has done a great job of training their employees, that the farmer can be gone for several weeks and the everybody is ready to get the job done and done well. I have observed many business operations where the owner feels like they have to be there to have it run well, when the opposite is true. The company actually runs better without the owner there since the employees are able to get their job done without interference from the owner. A farmer wants his farm to run well when he is not there, but he should also have the employees enjoy having him around.
A potential buyer would find the company an attractive acquisition because the company can be successful without the current owner(s) (and the current owner(s) have a viable exit strategy).
- Remember, you may never have any plans on selling the farm, but if you want the next generation to be involved and take over the farm, you are "selling" the farm. The better you can make the operation, the easier it will be for them to pay you and them.
This is the last part of the test. How well did you do. I would expect hardly any farms to answer true to all nine questions. However, if you are above six, you are a sustainable farm, below four, you need to work on the ones you answered false to.