Many farm owners expect to pass on their pride and joy to their children, another family member or an employee. This change in ownership can fund the owner’s retirement and carry on the farm down through the generations.
Yet all farmers face roadblocks that threaten to thwart their dreams. Here is a checklist of hazards you’ll want to avoid during this process.
1. Start planning too late. Many farmers leave succession planning until the last moment—if they plan at all. Yet an ideal succession plan requires laying the groundwork over many years. How you want to leave the farm tomorrow strongly influences how you structure and operate the farm today.
2. Assume a family member will take over the business. Although many children want to farm, not all do. Talk to your children. Encourage them to work in the farm business but don’t pressure them. Know every family member’s desires as soon as practical so you can pursue other avenues, if necessary.
3. Divide the farm equally among heirs. Equal ownership among heirs is usually a recipe for disaster. Different skills and visions inevitably lead to conflict. Decide who among your heirs has the talent, desire and skills to run the farm. If an heir does not want to be involved in the farm, plan to gift that person other assets.
4. Wait too long to transfer real authority. Many farmers don’t relinquish authority until the day they retire. Then they make the painful realization their successor isn’t up to the task. Involve heirs in your relationships with vendors, employees and customers.
5. Distrust your successor. This goes along with failure to give your heir genuine authority. Although you don’t want to trust someone blindly, you shouldn’t be so suspicious that you’re constantly peering over his or her shoulder. Whether you are working with a family member or an outside party, there is always a level of risk to leadership transitions. A nonvoting advisory board is a productive way to establish a framework for communication and accountability.
6. Fail to have potential successors gain experience at another business. It is a good idea to encourage an heir to work for someone else before committing to the family farm. This can be valuable training and provide a clearer sense of whether that person ultimately wants to run the show.
7. Be secretive about your plans. Farmers often play succession plans close to their chest. This is a disservice to heirs and potentially a disaster for the farm. The sooner you can reveal your plans, the sooner everyone can get on board. It also gives you time to modify the plan, if necessary.
8. Dread your retirement years. Retirement can be difficult for farmers. Without a clear plan for retirement, you will almost inevitably drift back to the farm, meddling in how it’s being run—often to the detriment of the farm and family relations.
9. Plan on your own. Succession planning is complicated (we haven’t even discussed tax issues). Employ outside advice for an objective perspective.
10. Avoid the journey and look for a cookie-cutter process. There are no shortcuts to a successful farm transition plan. As with many journeys in life, it can be fun and fruitful for those who go with you.
Unique To You. From a distance, many farms might look similar. Yet like snowflakes, no two farms are alike. That’s why it’s important to create a customized plan that addresses your unique needs. Start now!