Legacy Planning? Fish or Cut Bait

Legacy Planning? Fish or Cut Bait

In succession planning, the worst thing you can do is nothing

As Teddy Roosevelt said, "In any moment of decision, the best thing you can do is the right thing, the next best thing is the wrong thing, and the worst thing you can do is nothing." Sometimes, somebody needs to take the lead or nothing will get done.

Let's say you and your spouse are nearing 60. You have always talked about turning the business over to the next generation… "some day." The kids are in their late 20s and not sure if they would like to return to the farm, or if it's even possible for them to come "home." You think they'd like to take over the farm.

Do you have a plan to pass the farm on to the next generation? The worst thing you can do is nothing.

You've looked at the books and it's clear that the current operation can't support two families, or three. To bring one, or both, of the kids into the farm business would require the business to expand significantly over the next 10 years. That would require a big investment, a serious commitment, and it means getting everybody on the same page, which isn't always as easy as it sounds.

Even if your kids are on board with the ultimate goal, they may be hesitant because of all the variables at work. They don't know how it would look to come into the farm business. They are not sure they want to create a burden on you by joining the business. But they are getting to an age when they feel like they need to start getting serious about a career.

Both parties in this story are a bit stuck. Neither wants to create a burden on the other and as a result, no one is comfortable moving forward. Each party waits on the other to make a move so they can respond.

It doesn't have to be like that. There is a simple path forward. The hardest part is getting started.

In this situation, the parents should take the initiative by calling a family meeting. Even though you're meeting with loved ones, treat it like a professional business meeting. Hold it at a neutral site and it's a good idea to include a trusted family advisor like your financial advisor, CPA or attorney, to facilitate the meeting and answer questions as a neutral "referee."

The purpose of the meeting would be to develop a strategic plan for the next 20 years that would address the financial goals and challenges of your retirement needs while allowing you to transition the farm to your children.  To get the most out of this meeting, both parents and kids should think about the following questions:

  • What is your vision for the farm business in 10 years, 20 years?
  • What do you want the business to do? Do you want it to diversify into new enterprises, specialize in fewer enterprises? Are their family traditions you want to see continue?
  • What do you want the business NOT to do? Are you determined to prevent some bad thing from happening to the farm?
  • What do you want to be true for mom and dad?
  • What do you want to be true for each of the kids?

When parents take the lead and encourage a conversation about moving forward, everyone is invited to step forward together to create the next phase of the farm business. That's what's important – establishing a healthy process that addresses the challenges ahead. It's not so important WHAT you decide but that you find a way to decide. Make some choices, moves toward the ultimate goal while maintaining healthy family relationships.

It could be that the family decides to grow the business to the next level. Or your family may decide to exit the business strategically and intentionally so everybody benefits.

It's important to realize that you need to move forward into the transition process rather than delay. The problem will not go away just because you wait. The sooner you begin a conversation about the transition, the easier it is for everyone to deal with the work that is required.

If this blog has got you thinking about your own situation, get in touch with my office ([email protected]).

The opinions of Rich Dunn are not necessarily those of Farm Futures or the Penton Farm Progress Group.

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