Apr 19, 2014
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February 2014 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.

Get 'SMART' About Your Goals

Feb 26, 2014

iStock Green FarmFrom Legacy Moment (02.07.2014).
Please join us for future issues,
delivered via email each Friday.


Your dreams define your succession planning goals. For most families, their goals for succession—their intentions, wants and desires—will fall into the following three broad areas:

1. Creating, maintaining and transitioning a viable operation.
2. Preparing the next generation for leadership roles.
3. Enhancing the family's long-term financial security.

Each succession goal should be broken down into attainable objectives. What has to be accomplished in order for the family to enjoy the experiences you dream about?

Goals should be written in the "SMART" format—meaning they should be specific, measurable, actionable, relevant and time-bound.

Specific: Most people who suffer bouts of indecision and frustration are handicapped by a lack of vision. If you know exactly what you want, decisions are easy.

Measurable: A goal must be measurable. The objective is either met or not. If not, how close did you come? Will more effort get you there? How much harder should you try?

Actionable: Nothing happens until someone takes action. A person can wish, hope and want all day long, but the only way to accomplish a goal is to take action.

Relevant: The decisions you make and the actions you take determine your success in reaching a goal.

Time-bound: It's well-known that without a deadline, nothing would ever be finished. Time serves two functions: There must be a sufficient amount to ensure a successful outcome but not so much available that it fosters procrastination.

Set goals and then take the action necessary to achieve your vision of what's best for everyone.

News & Resources for You: 

It can be challenging to get specific about goals. Our worksheet can help.

You've outlined your vision and defined your goals. Take the next step to building your dream farm by writing a business plan.

Learn more about how to achieve your goals through the resource library at  eLegacyConnect.

Be sure to sign up for an upcoming Legacy Project Workshop. We'll be making stops in Lansing, Mich.; Columbus, Ohio; and Syracuse, N.Y.

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Dream Big!

Feb 19, 2014

Boise ID   USDA ARSFrom Legacy Moment.
Please join us for future issues,
delivered via email each Friday.


"Dream Big"?

That might sound a bit too idealistic, but I truly believe the images we see in our mind are what motivate us to work hard. Dreams motivate action, and actions achieve results.

Take a few moments and describe your perfect family operation. Let your mind wander. Think about your big aspirations with no limits.

With that picture in mind, answer the following questions. Your responses will help to focus your intentions.

 

  • Who works on the farm?  What are their roles?  Do they work with pride and appreciation?
  • How big is the operation?  How many acres?   Is land owed and/or rented?  Is livestock part of the equation?  What does the macherinery lineup include:
  • How much money does the operation generate?  Is it enough to give future generations opportunities?
  • What is the value of the operation?  Do the active family members realize a return in income, equity, and personal satisfaction?


Use your answers to these questions to narrow your focus just a bit. With your big dreams in mind, define your specific succession goals.

Use the resources below to help outline your dreams for your operation.

News & Resources for You:

These seven questions can help family business owners define their succession intent.

Your thoughts and desires about the farm business are important. Talk about them.

Be sure to sign up for an upcoming Legacy Project Workshop. In March 2014, we'll be making stops in Lansing, Mich.; Columbus, Ohio; and Syracuse, N.Y.

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Landlord/Tenant as Strategic Alliance

Feb 17, 2014

Ranch   Microsoft PhotoFrom Legacy Moment (01.24.2014).
Please join us for future issues,
delivered via email each Friday.


Most landlords are committed to farming and are intensely interested in knowing that their farm will continue to be productive into the future. There is a lot of mutual benefit in establishing a long-term lease, a buy-sell agreement, an option to purchase and a funding mechanism for the purchase. This will prepare you, as well as the landlord and his progeny, for the future.

Your landlord wants:

  • financial security and a monetary return from the land;
  • good stewards who will care for the land as if it is their own; and
  • satisfaction from a good working relationship with a farmer tenant.
     

You want:

  • financial security and assurance that the land will be available at a fair price;
  • well-cared-for land that will yield the best returns; and
  • peace of mind that your base is safe and your operation can grow.


You and your landlords should act as a strategic alliance in your farming operation—with each partner fully committed to the health and welfare of the entire farm operation.

I recommend you start a conversation with each landlord regarding your concerns. Let each of them know you understand and care about their interests. Share your plans for the future and, yes, talk about your succession plans. Introduce the concept of succession to your landlords by using your own efforts as an example. Be mindful that your landlords are not nearly as interested in what you say as they are in what you're doing.

Building a business and achieving continuous growth are constant challenges. Landlords might expect more information about your operation. They will appreciate regular meetings to discuss your plans, support your efforts and celebrate your successes.

To achieve this level of communication, many farmers publish a newsletter to keep their landlords informed, invite them to drop by the farm and host an appreciation supper or BBQ after harvest.

The only way to address your concerns about the stability of your landlord relationships is by taking action. Don't wait for them to broach the subject; it could be too late. Use these questions to start the conversation:

1. Do you already have a succession plan in place?

2. If you do, does it keep your land in farming for the long term?

3. Do you want your farm to remain in agriculture?

4. Are you willing to discuss long-term options for your land and future opportunities to enhance your family's financial security?

5. Can we negotiate a buy-sell arrangement that would better stabilize my farming base and offer both of our families viable business options for the future?

News & Resources for You:

A buy-sell agreement is key to keeping the farm together. Learn how to craft one.

If you have a buy-sell agreement, it doesn't hurt to review it.

Be sure to sign up for an upcoming Legacy Project Workshop. We'll be making stops in Lansing, Mich.; Columbus, Ohio; and Syracuse, N.Y.

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Rising Land Prices

Feb 11, 2014

iStock OperationFrom Legacy Moment (01.10.2014).
Please join us for future issues,
delivered via email each Friday.


"Can a young farmer really be successful if we don't sell our land at a discount? If so, how do we come up with a fair price, since we count the land as a large part of our retirement?" Although not far into the succession planning discussion, for this reader, land value is top of mind.

Yes, without a doubt, a young person can be successful, whether they own the land or not. Consider for a moment that many other commercial ventures, especially in the early stages of business growth, are located in leased facilities. From manufacturing plants to factories, from retail establishments to restaurants, many operations are established with long-term real estate leases. Over time, and with the right capital management plan, a person can one day afford to invest in land assets. But when starting out, mortgage payments are often an untenable expense.

As the current owner, your land could be a key to your financial security in retirement. With the appropriate lease agreements and a well-drafted buy/sell agreement, you can ensure your financial independence while helping your child[ren] get a good start in farming. So rather than selling at a discount, I suggest you establish a fair lease for the land. The agreement should include a cost-of-living adjustment, renewal provisions and a first right of refusal in case you (or a subsequent heir) need to sell your interests.

For many of our client engagements, one of the first things we do is establish separate entities for the land and the operation. In addition to helping better manage the assets, it establishes the foundation for an equitable distribution to non-farming heirs. For most, a substantial portion of the farming operation is comprised of leased property. Renting from family is no different than renting from any other landlord.

Beyond the tangible values of the land, we attach other intangible qualities that can hinder succession planning efforts. As land values continue to increase, we sometimes have to reevaluate our attachment. Although land is an integral part of the farming operation, 'control' could be a better objective than outright ownership.

News & Resources for You:

Most family matters involve emotion, so non-farming landlords need succession, too.

What conditions do you need in place to ensure your retirement goals?

Browse  eLegacyConnect for more about working as a productive family team.

Remember:  Legacy Project Workshops are right around the corner!  Sign up now for events in Michigan, Ohio, and New York.

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