John Phipps: Why Respect is the Key Factor in Transitioning a Farm to Next Generation

Last week I talked about the unforeseen emotions of the older generation and how they can mess up even the most careful transition plan. For those of tender years I would add these thoughts.

First, you’re going to live longer and healthier than you think, if you take care of your most important machine. You could have to wait until the nearly ancient age of say, 45, and still have a 30-year career. For farms like ours, access to land is key and those old guys who get the breaks have been waiting in line much longer. Keep in mind landowners are older people as a rule, so expect them to prefer somebody they have known for a long time to entrust with their acres. Which brings up the delicate task of shifting rented ground to a new generation. We started acclimating our landowners with the idea my son was already doing much of the work – which they all found believable, interestingly enough – and would follow me seamlessly. Then when multi-year contracts were due for renewal, we simply changed one first name.

Second, buying out the rolling capital – the machinery – can be an enormous financial hurdle. We did this with simple, unsecured demand notes with interest only payments. My son is less encumbered with debt payments, and our money stays invested in the farm at better rates than the bank, even though at the time, I thought I was being magnanimous.  Our whole family is completely aware of this arrangement.  They will sort out the notes after I’m gone, just like the acres. While this may strike some farmers as incredibly risky, it illustrates another crucial component. No transition will be successful if there is no trust nor respect between generations. Likewise, both should feel responsible for the other.  Transition plans should not be detailed to the point of inflexibility. Stuff happens, both good and bad. Words on paper are important but should not become scripture, in my opinion.

If done right, both generations should feel like they are sacrificing. A successful transition is seldom easy or painless. Note I haven’t brought up communications. Valid point, but repeated too much, I think. Don’t let perfection be the enemy of the possible. Expect to make changes in the plan.

Finally, this is how we are managing it. I trust my sons’ judgements more than my own now. When I said I was retiring, I was referring to simply renting my last two hundred acres to my son and not filing a Schedule F anymore. I will work on the farm as long as I can mostly to fill time and feel useful. Also because I never learned to play golf.