Define how your farm will survive and thrive beyond your leadership
Your farm’s succession plan is a marathon—not a sprint. A well-developed plan requires time, thought, advice and patience.
Farm operations fall into three major groups, in terms of succession planning, says Neil Harl, professor emeritus of economics at Iowa State University. They are:
- those planning for termination.
- those planning for continuation after retirement or death.
- those that have not yet faced the issue.
“You have to map a plan for the trajectory of the business,” Harl says.
To ensure your business will grow into the future and prosper amidst family disagreements, financial hurdles and unforeseen risks, build a business continuity plan. These plans create a strategy that recognizes the threats to your operation and determines how to overcome them—all with an eye on the future.
“Family businesses struggle with differentiating succession and estate planning,” says Dick Wittman, a family business consultant and Idaho farmer. “Failure to make a distinction between the two has resulted in poorly thought-out plans.”
Succession planning is comparable to business life continuity planning, Wittman explains. It deals with critical questions related to the stability of the family business, such as: Is this business viable past the current generation? Are there competent successors ready to carry on leadership if the operation continues? Who will provide the capital in the next generation?
“To answer these questions, family business stakeholders need to hold meetings and consult with their advisers,” he says. “There’s no substitute to a formal discussion.”
Honesty during these discussions is a must, Wittman says. Don’t force your expectations on others. You will face conflict, but remember the purposes of this process is to provide transparency and peace of mind.
“We are used to price and weather risk—we can’t control those,” Wittman says. “But when we create stress in our families because we won’t plan, that stress is our fault.” TP
Maximize Your Business’ Life Cycle
Farm operations, like other business, go through progressive phases of growth, success and decline. The timing of a management or ownership transition could accelerate or impair the operation.
Most farmers see continual growth in their operation until their mid-60s, but then growth starts to flatten out as they stop taking as many risks, says Dave Goeller, former transition specialist with the North Central Risk Management Education Center.
“If there’s a desire to bring a second generation into the business, do it before the business has completely topped out,” he says. “The ideal time is probably when the owner is in the mid-50s to 60s. The next generation has a better chance of succeeding if they start in the maturity phase.”
Make Your Succession Plan A Priority. Join Dick Wittman and other members of the Farm Journal Legacy Project Advisory Team at the 2019 Legacy Project Conference. The event will take place Jan. 14–15 in Chicago as part of the Top Producer Summit. Learn more and register at TPSummit.com.