Written By: Dr. Alex White
One of the most common topics in agriculture is how can/should parents bring the next generation into the farm business?
However, one question that never comes up is what stops parents from bringing the next generation into the farm business?
Most of us get serious about transition planning when someone in the community dies. We all see the negative impacts on that person’s family, and we say, “I won’t let that happen to my family.”
We promise ourselves we will start planning, then we get busy with cows in the wrong pen or the skidloader leaking hydraulic oil, and that takes immediate precedence over transition planning.
Next thing you know, transition planning is out of sight, out of mind, again.
When thinking about transition planning, it can be overwhelming. Your mind starts to cloud over with thoughts of lawyers and accountants and LLCs and estate taxes.
Sitting down with your family and having open, honest discussions about everyone’s goals and concerns can be difficult. Lack of communication is by far the biggest stumbling block in transition planning.
“What do you mean by that? We’re family. There’s nothing wrong with our communication. We all know what everyone wants.”
Like I said, the lack of family communication is the biggest hurdle.
We don’t have to do it this minute
Too often the familiar statement, “Well, we don’t have to do it this minute. We have plenty of time to develop a plan.” is used.
That’s what the father of one of my students said, about 2 months before he died unexpectedly.
That’s what the grandfather of one of my students said, for about 3 years – just long enough for my student to get frustrated and get a full-time job away from the farm.
That’s what five siblings said after they inherited the family farm from their mother – and then three of the siblings decided they were going to sell their acreage because they needed cash – all of a sudden the two remaining siblings who wanted to farm couldn’t.
The worst yet, all of these families were torn apart because at least one party thought there was plenty of time to start the planning process.
According to the Family Business Institute, only 30% of family businesses successfully make the transition from the first generation to the second generation; roughly 12% make it to the third generation; 4% make it to the fourth generation. And you want to know the sad part about this low success rate – in most cases the failure is voluntary.
The conscious (or subconscious) choice to not develop your transition plans and share them with your family is the main problem. Most family businesses can have a good chance of succeeding into the future if they would just take time to develop plans for the transition.
So, how do we start the process of transition planning?
START THE CONVERSATION about the future of your family farm TODAY!
Start small and don’t think you can address it all in one day.
Over the next few blogs, we’ll talk about the process of transition planning, who should be involved, setting timelines, legal organization, and family communication.
Dr. White is a Dairy Science Professor at Virginia Tech