A properly designed succession plan creates a better outcome for farm owners and their successors. The primary purpose of succession planning is to preserve, protect and promote the family’s most valuable asset. It removes uncertainty, mitigates risk and allows the owner to exercise control. It encourages the owner to plan for success and enjoy life.
A succession plan is more than just a binder full of legal documents and a life insurance policy. It’s dreams to realize. It’s business goals to attain and leadership capabilities to develop. It ensures a family’s financial security and the operation’s capital resources. Planning for succession is a big step on the road to long-term success and creating a lasting legacy.
During the past five years, I’ve met with numerous farm families and, though each family is unique, the reasons for not planning boiled down to a few explanations:
- Succession planning is often confused with estate planning. The goal of succession is to transition a going concern to a prepared next generation; estate planning minimizes the amount of taxes to be paid in case of a premature death in the family.
- Most families rely on advisers, such as CPAs, attorneys, etc., for help. However, due to the emotional roller coaster of succession planning, many of these advisers are not willing to engage in the process.
- Tools and techniques used in succession planning are undefined or are not readily available.
- Many operations are built around preserving a lifestyle, rather than generating a return on investment.
- Leadership training often consists of good parenting and a strong back, not a formal development plan, which is necessary for success.
YOU CAN SEND YOUR OWN QUESTIONS TO KEVIN AT LEGACYPROJECT@FARMJOURNAL.COM.