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Planning to pass the farm on to your children is a lifelong process and the planning should start from the time they’re old enough to do chores.
Children pick up the attitudes and work ethics of their parents, even when they’re at an age of doing just simple chores around the farm. If you are committed to the operation of the family farm and treat it like a viable business, then your children are going to pick up that attitude and take that sense of pride and joy into their lives, and then perhaps back to the family farm. Creating an openness to the family business is a strategic first step in creating a succession plan.
As the family grows up, the manner in which decisions are made on the farm also helps shape this future generation. In the right circumstances, a consensual decision-making style lays the path for success in the transition and eventual operation of the farm. Discussion and conversation form the end results and helps future generations work better together when making major farm decisions like land purchases or operations changes. It’s a far cry from a one-person leadership style, with one decision-maker at the helm.
No matter the age of your children, having a succession plan means you have control over the farm operations. Many are tempted not to begin succession planning because they say they don’t know when they’ll need it. That’s true with anything in the future, but the value of succession planning is it gives you control. If commodity prices soar or if the weather causes crop damage, you know exactly where your business stands and the impact these factors will have. Succession planning allows you to know how you, your family and your business will react to these situations.
DECIDE ON A DESTINATION
It’s also important to remember that while each farm and family is unique, these nuisances can still be reflected in the succession plan and how that’s done often becomes clear during the planning process. Consider succession planning like taking a journey. First you decide on your destination – your end goal – and then you take the steps to get there. Once you decide where you want to go and how you’re going to get there, the subsequent steps become easier. Succession planning is the same.
And it’s never too soon to bring in help. Often by the time a family contacts me, they’ve hit a wall and relationships are strained. The successor may be agitated because nothing is happening; Dad is paralyzed from making any decisions because he’s fretting about taxes; the successors’ spouses want security; Mom wants family harmony. This happens to everyone at different stages and with different reactions, but all reach that point when they can’t go any further in planning and don’t know what to do next. However, they do agree that they are willing to commit to the process and need help moving forward.
Operating a farm and succession planning include many moving parts. The business’s financial concerns and the family’s financial concerns overlap. When succession planning, you have to build all of those challenges in each of those domains. Getting help from someone who’s done it before and who is aware of the kinds of interactions you have is important. Lawyers, tax specialists, succession planners, business advisors – we work as a team, all focused on the family. As you work on solving one problem in the plan, 10 more can come up. It’s like trying to solve a Rubik’s Cube. Everything is connected to everything else and you can’t just work on one problem at a time. That’s why people need help – to keep all of the pieces of the planning in view and solve the problem holistically. You solve the Rubik’s Cube by solving all six sides at once, not one at a time.
Creating an environment of openness when the children are young can carry the succession planning process throughout a lifetime. With the family’s willingness to work together, set common goals and take a collaborative approach, succession planning can be a valuable business tool.
Contact Jonathan Small, BSc, PAg at 403.346.8878 or [email protected]
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