Finance first: Prepping the new generation

Finance first: Prepping the new generation

Get younger generation involved in decision-making and meetings with business partners

Our 28-year-old son has been working on our farm for the past six years. We put him in charge of several production aspects, and he does a good job. We're planning to transition leadership and ownership to him over the next seven to 10 years as we move into retirement. Because he's been so focused on production, we think he hasn't gotten much experience with the financial side of the operation yet. We believe he needs to be more prepared in that area if he's going to lead the operation when we retire. What are some ways to help him get experience while protecting the farm from decisions made by an inexperienced manager? — K.S. & J.S., Nebraska

Get younger generation involved in decision-making and meetings with business partners

You're absolutely right that he needs greater exposure to the business and financial side of the farm — and experience with making these types of decisions. Leading a successful farm in the future will require these skills to an even greater degree than in the past, so it's important that he learn from the two of you and draw on your past experience, as well as hands-on learning by independently making decisions.

There are a few ways your son can get this type of experience and exposure. The first is to have him join you in any meetings that involve these types of decisions and information — meetings with your lenders, tax accountant, suppliers and advisers. That way, he can see how you think and work through these decisions.

Before going to a meeting together, discuss what may happen. Afterward, ask him what he saw happening and what he thought about it. Ask what he would have done if he were making the decision and why. Then take him through your thought process on the decision.

You might also carve out a "sandbox" within the operation — an area where he's solely responsible for all the decisions and financial outcomes. Meet with him regularly to discuss recent and upcoming decisions, and hold him accountable for the results. This can be a good way for him to see the direct outcomes of his business decisions.

More Finance First:
How to analyze unprofitable crop acres
How can grain farms be proactive in a downturn?

Frye is president and CEO of Water Street Solutions. Email [email protected].

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