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March 2013 Archive for Leave a Legacy

RSS By: Kevin Spafford, Legacy Project

Kevin Spafford is Farm Journal’s succession planning expert for the Farm Journal Legacy Project.  He hosts the nationally-televised ‘Leave a Legacy’ TV, facilitates an ongoing series of workshops for farm families across the U.S., and is the author of Legacy by Design: Succession Planning for Agribusiness Owners.

Retirement, Like Aging, is Not a Surprise

Mar 26, 2013

Farm furrows   Microsoft pictureFrom Legacy Moment (03/22/2013).
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Assuming you live long enough, you're going to reach a point in life when you can't, or don't want to, work. At that time, you become dependent on earnings from investments or another person's income. There is no free lunch and, unfortunately, there is no do-over. You can't go back and better prepare for the inevitable.

All too often we see people well past a working age holding down a job and performing manual tasks in an obvious need for some form of income/financial security. For a farm owner the outcome might be similar, though a bit more tenable given the lasting value of land.

In a recent report by the Employee Benefit Research Institute, workers have concerns about job uncertainty, debt and the cost of retirement. "Among workers," the report says, "more than half report less than $25,000 in total household savings and investments."

For family farmers and folks working in the ag sector, outlooks are a lot different. We're still in the heyday. Returns have never been better and sustained gains have never lasted so long. But there is a flip side and no one should be lulled into complacency, especially if your goal is succession. Everything cycles, so there will be a downturn and when it hits we won't know how far down or how long...

Heed the warning and prepare for the inevitable. Using the seven major findings in the report as a guide take constructive actions to offset the threat and limit the potential damage. Consider:

1. Plan your career. Maintain the edge by continuous learning and professional development.

2. Invest off the farm. A diversified nest egg is a good way to prepare for an economic downturn, and it allows you to prepare for succession to the next generation.

3. Establish a retirement plan. Use the tax benefits afforded by a retirement plan and make regular contributions.

4. Understand the effects of inflation and the increasing cost of living. Always factor a cost of living adjustment into your retirement calculations.

5. Monitor the effects of the Affordable Health Care Act. The cost of health insurance whether through a government program or private source will affect a person's ability to retire.

6. Don't guess when it comes to how much to save and where to invest. Use real numbers and calculate your needs based on facts and written budgets.

7. Get professional help for financial planning. They say, "a person who self-medicates has a fool for a doctor." The same might be applied to other professional specialization, especially related to financial matters and tax implications. 

News & Resources for You:

Read more: 'EBRI's 2013 Retirement Confidence Survey: Perceived Savings Needs Outpace Reality for Many'

This tool might help you begin to consider retirement factors.

Guesswork won't do. Be sure to realistically calculate your estimated retirement income and expenses.  

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I Wish It Were That Simple!

Mar 19, 2013

Rear View Mirror   Prather RanchFrom Legacy Moment (03/15/2013).
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delivered via email each Friday.
 


Planning for succession is more than a simple decision to transition the operation from one generation to the next. Among other things it will include a review of:

Threats to the operation.

Opportunities in the market.

Capabilities of the management team.

Potential commodities given a fixed set of resources.

In other words, compromise is necessary to realize your dreams. Succession may lead to new opportunities and different ways of looking at the business.

As to adversity, there is always opportunity in challenge. For the operation that masters the challenges of an 'unfarm friendly environment' for instance, look to the example of Prather Ranch. It is a closed-herd organic/natural cattle producer. There is no waste in a Prather Ranch cow; every by-product of meat production is used in the medical field ('Leave a Legacy' TV: Prather Ranch).

For goals that extend beyond the normal horizon, consider adding vertical or horizontal operations and extending locations beyond local, consider Black Gold. As a potato producer, Greg and his three children have their hands full with locations across eleven states. The challenge of managing this sizeable operation is offset by seasonal variation of planting/harvest, weather/natural environment and economic/business opportunities.

When your goals focus on preserving a farming legacy on family land, the operation may of necessity change to meet various pressures. Mooney Farms adapted not only to survive, but learned to thrive due to the challenges of farming a perishable small market crop. They transferred their experience in the market from fruit to sundried tomatoes and have grown a formidable operation.

These are just a few of the examples to help a family more clearly define their goals and might see a future beyond the immediate season. Most goals, especially the multifaceted goals encompassed in the succession planning process, will be achieved only by implementing a detailed plan for the future. In this latest round of Farm Journal Legacy Project Workshops, I often remind farm families that preserving the operation may require a different approach. Clearly defining your goals is the key to success.

News & Resources for You:

Identify specific goals, and then take the necessary action to move to the next step.

To nurture a planning culture in your children, be purposeful.

The Legacy Project Workbook is available for free download. There's no time like the present to take a first step. 

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 Photo provided courtesy of the Rickert Family - Prather Ranch
 
 
 
 
 

Bucket List or Résumé of Accomplishments?

Mar 12, 2013

Apples in Bucket   USDA NRCSFrom Legacy Moment (03/08/2013).
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Bucket lists are for those counting time; accomplishments are for those making time count.

For some, life is measured by checking things off a bucket list. These people seem content being present when things happen. They like to attend spectator events, visit foreign ports and watch shows of interest. They're about seeing and doing. A typical bucket list might include:

• A trip to Tahiti
• Attending the Super Bowl
• Touring the Smithsonian
• Watching the start of the Iditarod

For others, life is measured by achievement, accomplishment and/or experiences. This type of person sets specific goals and then works hard to achieve success. Some goals come at great cost and all have an inherent level of risk. Whether the goal is large or small, this person knows that true satisfaction in life comes from the active pursuit of life-affirming experiences. Life to them is about accomplishment and continual improvement. A list of goals for this person might include:

• Growing the business by vertically integrating the dairy with a cheese processing enterprise.
• Improving the community by serving on the local school board.
• Developing cutting-edge agronomic practices and then licensing the technology.
• Learning a new language and foreign culture to develop export opportunities.

So, a bucket list contains things to see, do or hear—passive and rather sedate activities that feed the soul. Accomplishments are goals to achieve—active, life-affirming experiences with a risk of failure and a reward for success. A good life is built on a balance of both, passive and active endeavors.

For those seeking high accomplishment, invest (your time) wisely.

News & Resources for You: 

Meet a Nebraska farmer who previously spent two decades following her off-farm dreams. As she traveled the world, she learned that growing up in the ag community had given her all she needed to succeed. (Pam Fretwell interview for Consumer Ag Connection)

Have a long-term vision in mind? Make it happen.

Follow your own dreams. Designing a business can be one of the most exciting activities in the life of an agripreneur.     

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Photo courtesy of USDA NRCS.
 
 
 
 
 
 

Generational Differences

Mar 05, 2013

iStock Three Generations   low resolutionFrom Legacy Moment (03/01/2013).
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delivered via email each Friday.


At a recent workshop, a young man sitting next to what looked to be his grandfather, asked, "What are some of the challenges you see among different generations on a farm?"

This is a huge question; it's puzzled man since the beginning of time. Peruse the shelves of any library, review the course offerings at the local college or check the Internet for topics related to generational differences, and you'll be overwhelmed by the sheer number of selections.

Though a bit obvious, but not simple, there are three areas that jump to mind that separate the generations:

1. Experience: Though almost self-explanatory, experiences will vary across multiple generations. Like anything else, those differences might be both a blessing and a curse. On a positive note, using the experiences of another person allows us to leverage the capabilities of the entire management team. As a negative, people have a tendency to staunchly oppose any option based on a past experience, regardless of whether or not the circumstances of the situation are different.

2. History: History, as a reference to time and circumstance, is definitely different among the generations and will affect everything related to communication. It is very hard for someone who lived through the Great Depression, or the generation who survived the agricultural meltdown of the 1980s, to readily open up the purse strings to expand the operation. Empathizing with each generation and learning to appreciate historical difference might, again, build a stronger management team.

3. Desires/Wants/Goals: Each person, regardless of generation, has their own self-interest at heart. Understanding that statement will go a long way toward bridging the communication gap. That said, there are common goals that are shared across the generations. We all strive for making the operation stronger, we all want financial security for our families and most people want to grow professionally. Acknowledging these common desires allows the family to work toward common goals. For example, everyone agrees that financial security is important, though a young person might want to increase current income while the senior generation is focused on growing equity. From those two dissimilar objectives, the family can agree on specific goals, and take the actions necessary to realize those objectives. In doing so the generations might rally around a common goal of providing financial security for family members working in the operation.

News & Resources for You:

Among generations, your success depends on the quality and the quantity of communication within the family.

In communicating with the senior generation, supporting your proposal with sound reasoningis the best approach.

Time is running out to enroll in a Legacy Project Workshop. Remember, our March tour includes stops in Ames, Iowa; Dubuque, Iowa; Mankato, Minn.; and Sioux Falls, S.D.

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