About 70% of North American farm ground will change hands by 2025.
That's one of the startling facts to come out of our 2010 Farm Futures Management Summit, held in St. Louis and focusing on strategies for multi-generation farm operations.
Since more and more modern farms have operators from more than one generation, it made sense to tackle this topic. Apparently others felt the same way, as we had more farmers (many toting along sons and daughters) than at any previous summit.
Farm management consultants Moe Russell and Dave Kohl, among others, shared their wisdom. Among the bits of advice: for those who expect to bring a new person into the business, start thinking about transition management now.
For many farm families, transition often comes at the last minute, when a major crisis occurs – say, a death in the family - and is conducted in an emotional state of mind, notes Kohl. "That's not the best way to transition a business, especially a family farm," he adds.
Passing the farm to the next generation is a key strategy for every multi-generation farm. But it may not be a family member, as Kohl points out. He says 21% of farmers don't have a 'next generation' family member to turn to.
What it takes Kohl (left) talked about what it takes to bring the younger generation back in and gracefully exit the older generation. Top of the list: communication and better business practices.
In his surveys, farmers who communicate are 21% more profitable. And, in a study he found that Northwest producers who separated business and family were 63% larger & had 22% more net income.
Kohl believes farmers should have a 'transition management team' in place, including an accountant, lawyer, outside facilitator, and other crop/livestock and financial specialists. The business transition plan should be written, with buy-sell agreements and a fair, but not equal, treatment concerning non-active family business members.
The younger generation should have at least three to five years of experience away from the farm first, to get a better understanding of business in a non-farm situation.
Another important factor is a business model that provides for a minimum of a 4% to 8% increase in net farm or business income annually over the next five years, as a new generation operator is brought in to the business.
That might be a lot to think about, but if you look at management transition as an ongoing effort, it becomes part of the business plan and not so intimidating. If you have no transition plan and you know you need one, now is a good time to call in professional help and get going. You'll sleep better.
What do you think? Let me hear from you.