No Talk, No Plan, No Succession - Elaine Froese | Canada’s Farm Whisperer | Your go-to expert for farm families who want better communication and conflict resolution to secure a successful farm transition

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No Talk, No Plan, No Succession

by | Feb 21, 2011 | Uncategorized

No Talk, No Plan, No Succession

5.6 percent of farmers want to exit the business in 10 years, but only a few have a formal succession plan.

If there are 50,000 families reading Grainews, then I wonder if 34 percent of those readers have succession planning as a high priority concern. That would be 17,000 farm families. According to the Canadian Federation of Independent Business June 2007 farm member’s opinion survey, 34 percent of respondents called “succession” a high priority issue.

This same study also found that 27 percent want to exit the agri-business in the next five years, and another 29 percent want to say goodbye in 10 years. That’s over half who are thinking about transitioning out of their farm or agri-business. Of these folks on the five-year exit plan, over half do not yet have a successor.

No successor, no talk, no plan.

Do you have someone to take over the management, labor, and ownership of your farm? That’s what succession is. Usually, with bad backs, Dad lets go of the labor first, then the management, and lastly the ownership piece.

If you have someone getting ready to become a manager and owner, then you are likely talking. In the CFIB study, 52 percent of the respondents had no plan, and 38 percent had just an informal one. (I think this informal plan is likely in the owner’s brain). Why are so few farmers making formal plans?

Here are some excuses

  1. Timing. Many say it is too early to start planning. They will keep saying this until it’s too late. As one very blunt chicken farmer told me, “We are not 20 years old anymore!!!”
  2. No time to deal with the issue. Death and taxes are inevitable. I think you smart managers spend some time planning your wills, estate, and tax liability coverage strategies. When does transition and succession planning hit the top of the “to-do list”?
  3. Can’t find adequate advice/tools to start. We always find the time and resources for what is truly important to us. Start at www.cafanet.com to find a list of advisors in your area. Talk to your farm friends who have already done succession well. Go to www.farmcentre.com and explore the resources and archives. Spend $29 for a copy of Managing the Multigenerational Farm. At the farmcentre.com site, watch me on “When letting go is hard” in the agri-webinar archives. Watch Agvision TV on Sunday afternoons or on the Internet at www.agvisiontv.com and sign up for the newsletters at www.topmanagers.ca. Buy a copy of Dr. John Fast’s new book, The Family Business Doctor. There are piles of resources and tools, just a click or a call away.
  4. Too complex. You have to plan to live and not just plan to die. What does the space between age 62 and 82 look like to you? Dream a little. Saying the process is too complex is a judgment. Come from curiosity and invite the family over for a circle meeting to start talking about expectations of roles and lifestyle needs. Hire a facilitator or coach to keep the meeting process on track and safe. File your papers in a handy binder with tabs for each key advisor: legal, tax, lifestyle, etc.
  5. Don’t want to think about leaving. Ah yes, letting go is hard. So if you don’t think about it, it will not happen. This thought blocking is not a great way to have family harmony and business success. Think about what would make leaving worthwhile. What does a great day on the farm look like to you? Maybe you don’t have to physically leave, you just need to change lanes and have a new role. Maybe you need to take some time to test out new business ideas. The CFIB study found many founders were planning to leave and start another new business!
  6. Conflict with family/employees. Family and workers may be one and the same. Conflict is a normal part of life. Avoiding conflict is death. Taking on some new skills to manage conflict is a smart business risk management strategy.

How are you sleeping?

One of the gaps in the CFIB study was the unanswered question: “What are the factors that motivate small and medium-sized enterprise owners to plan for succession?” That’s a question I would like your feedback on for future articles. You can go to www.elainefroese.com and click on the askelainefroese.com link to send me your answer.

My guess is that each person has his or her own reason or motivation for change. Fear is one, but fear is not a great motivator as it tends to have negative implications. But if you can embrace your fear and do the planning anyway, you have begun the journey of 1,000 succession steps by taking the first step. Anger is fear’s cousin. Are you hurt, afraid or just plain frustrated?

Stress relief is another motivator. I like to get a good night’s sleep. And I sleep better when I’m not stressed. My motivation for action is to decrease my stress and have things taken care of. I will use the outside advice of professionals, and I communicate with the rest of the farm team. How are you sleeping?

Are you talking?

Building relational capital is the key to family harmony and profitable farm business. One of David Kohl’s Virginia Tech graduate students studied 400 farms across six states and found that the farm teams that had great communication — they talked with each other — were 21 percent more profitable than the teams that didn’t have a great way to share visions, intent, and goals.

You may now be motivated to take the bull by the horns and make the calls to the advisors you trust to start the succession process. A family is like a mobile, and if you start to change, then you are going to shake the rest of the clan’s balance…and the chaos will be okay if everyone works hard to communicate their true values and beliefs.

In the end, you will take joy in seeing your adult children having certainty about their future. This is another motivator. For one family, they decided not to pass along the farm, but to sell it. They had other income streams, and the adult children could use the money from their “pre-inheritance”. The parents were delighted to be alive and hear the thanks, and see the results of the wealth they had generated. The farming son paid mortgages to his sisters.

The great motivator

Some people have no intention — or at least, no motivation — to put plans in place before they leave this earth. And because these people are not doing any planning, the kids get frustrated. A day will come when the farming adult children wake up and say “that’s enough. Something changes here, or we are gone.” I hear these stories often. Ultimatums are not great tools for planning with a spirit of generosity and flexibility. Tough love is the last resort. Face your mortality, have conversations, and make plans. Save taxes. Build relational capital. That’s the legacy you really want.
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Elaine Froese is a catalyst for courageous conversations with farm families in transition. She speaks across Canada and the US to give practical tools for talking about tough issues. She’ll be celebrating Thanksgiving with her family at the farm near Boissevain.

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