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Family Business Matters 07/24 15:27
Why Farm Owners Avoid Succession Planning Conversations
Most farm and ranch owners want to pass on their legacy but avoid the
conversation. Unspoken fears about leadership, retirement finances and personal
identity can quietly kill succession plans.
Lance Woodbury
DTN Farm Business Adviser
Most farm and ranch owners want their businesses to continue. The land
represents a legacy. The assets, both financial and reputational, offer
opportunities for the next generation. The senior generation feels deep
satisfaction at the prospect of seeing decades of work transfer to younger
family members.
Except the conversation about how and when that transfer will happen often
doesn't take place. Plans go undrafted. Estate documents stay outdated. Roles,
ownership and timing assumptions remain unspoken. Years pass, and the runway
for intentional handoffs, effective tax planning and thoughtful leadership
development gets shorter. The younger generation's desire for certainty about
the future slips slowly away.
Why do we avoid conversation? Underneath the silence sit several questions
the senior generation often hasn't answered for themselves. Until they do, the
transition process stalls.
AM I CONFIDENT IN THE NEXT GENERATION'S ABILITY TO LEAD?
There are two concerns at play in this question. The first is whether
members of the younger generation have the skills and experience to lead. Do
they understand how the business works? Are they capable? Have they
internalized lessons one often learns primarily through hardship?
The second concern is whether the next generation can work together. If
you've witnessed sibling rivalry or conflict among your adult children or their
spouses, it's easier to imagine the partnership unraveling the moment you're no
longer the glue holding it in place.
CAN THE BUSINESS SURVIVE WITHOUT ME?
You may believe that no one else in the family business can do what you do.
The insight, experiences, skills and tactics required to steer the business
exist only in you. This isn't necessarily an egotistical view; farming today
faces a unique set of challenges not seen in decades. The younger generation
simply hasn't been through it, and the business still needs you to lead.
Is there enough money to retire? Until the cash-flow math is run, retirement
feels like a cliff rather than a path. When profits from better years have been
reinvested in land, and rent on family land has been held artificially low to
help with cash-flow, can the business support a retiree? And, if you haven't
planned your multiyear tax strategy for retirement, stopping in any one year is
almost impossible because of the tax cost associated with the asset
depreciation and income deferral strategies you've used in the past.
WHO AM I IF I'M NOT FARMING OR RANCHING?
Your work is a part of who you are. Being the owner and operator of a farm
or ranch business is freighted with social significance and community
importance. Your vocation has personal meaning and provides a purpose to your
life. Stepping back can feel like becoming invisible. It's confusing,
disorienting and deeply uncomfortable.
Agriculture has plenty of challenges -- markets, input costs, labor and
weather, to name a few. Avoiding the conversation about the future doesn't
lower the risk; it adds to it. Waiting another five years to start talking only
increases the pressure for the work that follows, which already takes years.
There are real business and emotional issues to address. Some will be
uncomfortable. But avoiding the talk does no one any favors -- not the senior
generation, not the next, not the business and not the legacy you intend to
leave. Ask yourself which of the questions describes your concerns. Then, take
one concrete step to help answer it. You don't have to solve everything at
once. You just have to get started.
Lance Woodbury can be reached at lance.woodbury@pinionglobal.com
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