I recently taped a podcast with Dave Specht who is the director of Global Family Business Institute at The Drucker School of Management and perhaps more importantly lives in Basin City, Washington (I will let you look it up on a map).
During the podcast, we discussed what makes a good family farm transition. He mentioned the three C’s:
- Contingency planning. Has the family determined what would happen if suddenly you were killed in a car wreck? Would the next generation be ready to immediately step in and take over and perhaps even do a better job?
- Cash flow planning. Have you developed a plan that shows how much cash flow you would have in retirement and even more importantly how much cash flow the farm generates? Does the next generation understand how this cash flow is derived and what goes into making it?
- Communication planning. Have you communicated your plans to the next generation, including any of those “in-laws?” If you only communicate your plans to your kids, they will then communicate your plans to their spouse. Will it have the same impact? Also, have you introduced your kids to your important contacts, such as input dealers, CPAs, attorneys, insurance agents, etc.
As you can see, these three C’s are very important. A successful family farm transition has likely succeeded in all three. It is difficult to achieve a good farm transition without at least doing well in each of these C’s.
Listen to the podcast:
