USDA estimates that 70% of farmland will change hands in the next 20 years. Many families do not have a next generation skilled in or willing to continue farming. If a family has not adequately planned for succession, the operation will likely go out of business, be absorbed into ever-larger farms or be converted to nonfarm uses.
Using the five keys to planning success will create a succession road map designed to achieve results that will last for generations to come.
1. Learn to use good communication. Connect in a respectful and constructive manner to plan for the future, as well as help family members grow personally and professionally. Communication is more than talking, though. It’s listening to learn and taking actions to support your words. It’s important to have regular meetings, written agendas, behavior guidelines, a decision-making process, written or taped records of each meeting and follow-up procedures for every meeting.
2. Define common objectives. Human nature tells us to focus on our own needs first. But efforts focused on what’s best for the business will result in an operation that is able to endow the family with financial rewards, growing equity and vocational satisfaction for all generations.
3. Overcome common obstacles. A succession plan must address problems common to every family-owned business. This process is designed to distill concerns, draw them out into the open and then design solutions. At some point in the succession planning process, each family will have to face five common challenges: financial insecurity, equal versus fair, active versus inactive, in-laws and the unknown.
4. Fortify the operation. If the operation is going to survive and continue to provide for the family for generations, it must have a voice in the discussion. Family members must realize the physical, financial and intrinsic value of continuing farm ownership. Each decision must be measured against what is good for the operation, and personal goals must not compromise or unduly burden the operation.
5. Take definitive action. Good intentions without action are hollow promises. Each active member of the family must play a role in the succession planning process. From family meetings to decisions, conversation to implementation, accountability to professional development, each person must accept the obligation for a successful outcome.
The following information is taken from my "Leave A Legacy" columns in Farm Journal.
With communication and compromise, it is possible to create a succession plan that addresses everyone's needs.
Approaching a parent about your interest in farming is not as complicated as it seems. In fact, it is one of the biggest compliments you can bestow.
When succession planning, ensuring the long-term security of your operation is important. Make sure to notify landlords of your plans and include them in the conversation.
A comprehensive succession plan always includes strategies to mitigate the estate tax and minimize transfer obligations. But even the best estate plan may not address succession concerns.