Here’s a staggering fact: Families fail to keep their families and fortunes together for three or more generations 90% of the time. While these seem like unbeatable odds, with good planning and preparation, farmers can become part of the coveted 10% who stick together, says Alan Richardson, a business adviser with Transition Point Business Advisors.
"The 10% who continue past three generations focus on both family and business aspects," Richardson says. On the business front, the successful ones prepare the next generation to effectively run the company. Additionally, the families prepare their heirs for the inheritance they will receive.
Both of these vital missions require building a culture of communication and trust, as well as developing leadership in the next generation. "It is important to work in the business, as well as on the business," he says.
Define your goals. The farm and its assets typically represent 97% of what a farm family owns, says Kevin Spafford, Farm Journal succession planning expert. Yet, even with the farm comprising this much of a farmer’s financial worth, he says, farmers neglect to make time for succession planning.
"Real life does get in the way," he says. "But it won’t get easier, so you have to make it a priority."
For many, succession planning is centered on death. It’s that "what will happen to the farm when I die," discussion. "You need to turn that negative into a positive," Spafford says. "Change that ‘When you die …’ conversation to ‘How do we grow it forward?’ "
Spafford says the place to start is by agreeing on common goals. "We know that when we open up these conversations, there will be some kind of disagreement," he says. "But common goals help families focus on shared objectives. Once everyone is looking at the same picture, you can determine what steps are needed to get there."
Ask each person involved what they want to achieve, and then see where the goals overlap. In many cases, Spafford says, the consensus of the group centers on improving the operation’s integrity, enhancing the family’s financial security and preparing the next generation to lead.
Once you agree on your family’s goal, put those objectives in writing and distribute them to the group, Richardson says. "If you don’t have a written plan, you don’t have a plan," he says. "Determine your collective and unified vision for your operation for the next three to five to 10 years. Knowing, plus clearly and consistently communicating where you intend to go will get you halfway there. To get the rest of the way there, develop and implement a plan to do so."
Farm families in business together need to realize that combining family and business is extremely challenging and requires enormous effort, Richardson says.
"It can take five to 20 years to complete a successful ownership and management succession plan," he says. "This may be the most important thing you work on this year."
- March 2014