Greg Dell jokingly calls himself a late bloomer. At an age when most farmers might be contemplating retirement, the Westminster, Md., farmer and his wife, Della, find themselves in the primary ownership position for the family farm.
Ironically, at the same time they are grasping the reins, they are also looking for ways to bring their children into management and leadership roles.
When Farm Journal readers met the Dell family a year ago, it was four generations deep and struggling for direction. Working with Farm Journal succession planning expert Kevin Spafford has allowed them to sort through the maze and begin to find financial and management solutions to help the family and the farm survive.
During the past year, the transition process for the family has included:
- Financial analysis for first-generation founders Donald and Leona to ensure their financial security.
- A plan to allow Roger, second-generation brother/partner, to retire through a 20-year purchase agreement that redeems his stock in the farm corporation.
- Gifting of preferred stock from Donald and Leona to Greg.
- Transition of bookkeeping responsibilities from Leona to Shannon, wife of Tommy (third generation).
- Sale of dairy cows in the farm partnership to reduce debt.
- A business plan that allows Gary and Crystal (third generation) to purchase the remaining cows and rent dairy facilities.
- Review of current C-corporation ownership structure.
- Review of current estate planning documents to ensure they meet the family’s objectives.
- Analysis to minimize taxes on each estate and ensure that funds are available to pay any tax due.
- Meetings with attorney and tax accountants to keep advisers current and working together.
The next steps. “Greg now holds both the obligation and opportunity of ownership,” Spafford says. “From here, we start to anticipate what the farm might look like in the future, but we don’t have to be in a hurry to divide everything with the third generation.”
First, Spafford wants to review Greg and Della’s personal expenses and look at their hopes and dreams. Della, who works for the state of Maryland, has another six years before she can receive full benefits upon retirement.
Greg, on the other hand, can’t fathom retirement. “I always figured when they slam the lid, I’m done,” he says. “My problem is that farming is my recreation, too.”
The question of roles and responsibilities is more immediate than mere ownership transfer, Spafford believes. “We now need to fortify the farm operation as it stands today,” he says. “How do we enlist the people who want to be involved and keep them moving forward?”
Third generation enters. It’s easy to see the enthusiasm of youth when the third generation enters the succession planning discussions. Tommy has been leading the crop enterprises, and now that the dairy has been downsized, Gary has found he actually enjoys row-crop farming and working at the family’s grain elevator. Douglas, a full-time firefighter, still enjoys working on the farm part-time when possible.
Gary and Tommy also are considering new enterprises that might use their commercial grain-handling facilities. An existing seed sales business might be expanded as well. The farm’s location near an urban area offers retail possibilities.
Spafford says a top priority is to stabilize the operation so that ultimately the family can take advantage of these ideas. “The operation is saying, ‘Take care of me first. I’m paying each one of you around this table.’
“This family has lots of talent, lots of experience and huge amounts of resources. Our next challenge is to figure out how we pull it all together,” he adds.
A business plan that defines roles, responsibilities and compensation is the answer. Operating agreements, employment policies and an employee handbook are in the works.
“Anyone can go from one generation to the next; it’s the one after that is key,” Spafford notes.
“Our job now is to protect the farm, preserve it and grow it. If we do that, we can build a compensation plan that is fair. We’ll worry about the next ownership questions later.”
Greg says the past year of consulting help has remodeled the family business. “But I’m not so sure we won’t need you guys even more as we sort out how to bring along this next generation,” he says.
- September 2010