Working on the next moves in the succession planning process are Leon Knirk (left) and Barry Ward of Ohio State University.
Plan the work and work the plan: That sums up Leon Knirk’s mind-set as he began the transition from professional golfer to farmer nearly 10 years ago.
Today, Knirk, a third-generation family farmer, is in charge of all the day-to-day financial and management decisions for his family’s 2,000-acre grain and livestock operation near Quincy, in south-central Michigan.
Knirk says having a solid plan to follow helped make the tran-sition successful. He also credits his father, Dick, for offering him the farming opportunity in the first place.
“It’s not been easy at times, but my dad’s managed to let go and let me take over the reins,” says Knirk, who participates in Farm Journal’s Ultimate Farm Quest effort.
The entire transition process took nearly a decade for the two men to complete. That kind of time frame is not unusual, according to Kevin Spafford, the succession planning expert who spearheads the Farm Journal Legacy Project. “Establishing and implementing a comprehensive transition plan can easily take two to three years and often stretches into several more years as refinements take place,” Spafford explains. “It is a dynamic process that needs to continue year after year as the operation and the family evolve.”
As part of the Ultimate Farm Quest program, which is designed to help successful farmers take their operation to a higher level of success, the Knirks have been working with Barry Ward, Ohio State University farm business management specialist. “The Knirks have done an exceptional job,” Ward says. “Doing a good job of getting the next generation on-board and increasing their stake in the farm operation takes time.”
Ward says he typically works with farmers to address two distinct types of succession planning: estate planning and transition planning.
“When we talk about estate planning, we’re discussing the dollars and cents aspect of the operation,” he says.
That means setting up assets to pass properly from the older generation to the younger generation and, in the process, effectively managing the potential tax burden.
Transition planning involves more of what Ward calls the philosophical management aspects of the farm.
“That’s the plan that enables us to pass along nontangible things that are important to the farm operation, such as business relationships the older generation has maintained for years but needs to pass along to the younger generation,” he explains.
Build a team. Gary Hachfeld, University of Minnesota Extension educator, encourages farmers to seek good counsel for succession planning. In addition to consultants and Extension personnel who specialize in agricultural succession planning, the Farm Journal Legacy Project offers insight, planning tools and other resources (see www.FarmJournalLegacyProject.com).
“Do your homework before you hire anyone; interview them and ask lots of questions,” Hachfeld says. He mentions that most legal firms provide a free one-hour consultation, and he encourages farmers to use that benefit to educate themselves.
“See if they understand agriculture, the legal issues impacting farms in your state and the specific needs you have with your operation,” Hachfeld says. “If you don’t get answers that satisfy you, go talk with another specialist.”
The succession planning process normally requires a team of professionals with various skill sets, namely an adviser, an attorney and an accountant.
For the sake of convenience, Neil Harl, emeritus professor of economics at Iowa State University,
encourages farmers to begin their search for counsel close to home.
“You can then seek additional, specialized counsel farther away in any areas that might need shoring up,” Harl says.
Hachfeld and Ward also encourage farmers to check out succession planning workshops.
Knirk says he and his dad worked with their local Extension specialist, a succession planning consultant and a couple of lawyers during the process.
“Having those people meet with us, so we could ask them hard questions and put together a plan, was probably the best thing we did,” Knirk says.
Knirk says he knows that he and his wife, Jennifer, and their young sons, Lincoln and Logan, are blessed to have the opportunity to continue the family farm, given the poor survival rate of such operations. On average, only 15% of family farms survive to the third generation.
“Sometimes, when I have a minute at night, I like to walk around and look at this ground that our family has farmed for so many years,” Knirk says. “I just want to keep it going.”
Making plans and working those plans seem to be making that happen for this Michigan family.
The Quest to Do Their Best
During the past six months, Farm Journal Media has chronicled the goals and achievements of its Ultimate Farm Quest participants, Leon and Jennifer Knirk, featured here, and Doug and Nancy Rupp, featured in Top Producer. These outstanding farm families, along with their three expert advisers, dived headlong into the project this past spring and have worked diligently to increase the success of their farm operations. To date, some of the topics they have tackled include:
- Marketing. With direction from Pro Farmer Editor and Publisher Chip Flory, the two families have evaluated various marketing strategies to improve their marketing prowess and boost revenue on each acre.
- Business Management. The families have worked with Barry Ward, Ohio Sate University farm business management specialist, to assess new bookkeeping software programs and succession planning tools.
- Agronomics. With leadership provided by Farm Journal Associate Field Agronomist Missy Bauer, both families have evaluated new tillage practices, assessed their fields for yield-robbing pests, such as corn nematodes, and employed technology to assess the productivity of their soils.
You can learn more, watch our television coverage, read blogs and view photo slide shows at www.UltimateFarmQuest.com.
Steps to Success
The Samuel Roberts Noble Foundation, a nonprofit institute based in Ardmore, Okla., provides these suggestions to help farmers with the succession planning process:
- Start the process now. The earlier you begin, the greater the likelihood of achieving your goal.
- Assess the finances of your business. Is your business profitable? Will continuing your operation be a boon or a burden to your successors?
- Schedule regular, formalized family meetings. Encourage everyone to learn about succession planning.
- Begin planning for your retirement.
- Outline how and when labor and management will be transferred, including a successor development plan.
- Ownership transfer includes—but is not limited to—a legal, current will.
- Develop a contingency plan at the beginning of the process. How will you handle divorce, illness, injury or death if it occurs before succession planning is completed? The ultimate contingency plan is a will.
- Set a timetable for completion of activities. Measure progress against the timetable and adjust as needed.
- December 2010