Succession planning is a hot topic. As the Greatest Generation passes and the Baby Boomer Generation retires, who will inherit and continue the great companies and farms that these generations have built?
Last week we co-hosted “The Future of Your Farm: Start the Conversation Now” with guest speakers from Water Street Solutions. Darren Frye and Ben Metzger didn’t come to sell their services. Instead, they asked questions and told stories about farm families who didn’t talk it through as either a family or as a business. As a result, the next generation struggled, fought, or lost the farm.
Similarly, the Grundy County Chamber of Commerce is hosting a “Business Succession Planning” luncheon on August 28th. As you look at the downtowns of our communities, you see many family-owned businesses. Are they ready for the next generation to continue?
Whether your business is a farm or store-front, there are a number of questions to ask yourself to get motivated to have a family sit-down: Do the kids want the farm/business? What if only one child wants to continue in the business? Do the kids want to sell right away? Do they have the skill set to continue? Even if they keep the farm and rent it, how well will they be able to manage the tenant and books? Do you have the farm set up like a business with management items such as an employee hiring/firing policy?
If the answers to these questions are not clear in your mind and around the dinner table, it’s time to start the conversation.
It’s also not time to bring in the professionals advisors – attorneys, accountants, financial planners. First you as a family need to discuss (and hopefully agree!) about the future of the farm/business. After you have achieved general consensus, then you can bring in the professionals to help put to paper the plans your family has made.
By the way, a basic will and estate plan is not enough. An effective succession plan will not be a secret to be kept under lock and key and read only in the paneled walls of the lawyer’s office like in the movies. It will be a living, breathing plan that is continually tweaked throughout the seasons as lessons are learned and skills are passed on.
If this isn’t convincing enough, try these numbers: For every first-generation farm, only 300 will survive to the second generation. Only 30 will survive to the third. Only one will survive to the fourth generation.
One out of 1,000 farms will survive to the fourth generation.
How many generations has your farm existed? How about friends and neighbors?
Now, this is not to say that a healthy farm or business cannot or should not pass on to non-family members. If it can remain vibrant under new ownership, that’s okay – provided that that is what the family planned. The point is to avoid hurt feelings and legal squabbles. A healthy family and healthy business are priorities.
Also please know that your family is not alone. A national statistic says that 70% of family farms do not have a succession plan. Wouldn’t you like to be among the 30% who do?
And, you don’t have to do this alone. If your business is a farm, there are many resources out there for you, including the Farm Bureau and the Farm Journal Legacy Project.
For business owners, a quick internet search listed many resources, including quality names such as Forbes, Entrepreneur.com, and the Small Business Administration.
Also please know that a farm/business succession plan is not drafted overnight. It takes time, listening, and politics. These are not easy items to do, but necessary.
Grundy County’s heritage and quality of life are dependent on our agricultural and business community. It is our hope that your family succeeds in these endeavors!