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Making Farm Successions Successful 2014 Women Managing The Farm Conference
Manhattan, KS February 13, 2014
Gregg Hadley, PhD
Assistant Director – Agriculture, Natural Resources, and Community Development K-State Research and Extension
[email protected] 785-532-5838
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Why?
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Grandma and Grandpa (The Past Generation)
Mom and Dad (The Current Generation)
Farming Brother and Sister (The Next Generation)
Non-Farming Brother and Sister
The Brothers’ and Sisters’ Spouses
The Brothers’ and Sisters’ Kids (The Future)
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What Do We Hope For With Farm Succession?
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An Ongoing Farm & A Happy Family
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What Do We Fear About Farm Succession?
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What Obstacles Must We Overcome Regarding Farm Succession?
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Why Listen To Me? • K-State Research & Extension
Assistant Director – Agriculture, Natural Resources and Community Development
– Extension Profession Coach
• Extension Farm Management Specialist & Associate Professor
– University of Wisconsin – Extension – University of Wisconsin – River Falls
• Feed Industry • Farming
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Rules and Promises
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Today’s Goals • Learn about farm succession by discussing
commonly held beliefs about succession • Provide succession planning
recommendations • Encourage you to start succession planning
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WE DON’T NEED A DETAILED SUCCESSION PLAN
Succession Belief 1:
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Test Questions To Determine If You Need Succession Planning
• To the current generation of owner/manager: – Do you always agree with your successor’s
business philosophy, management ideas and decisions?
• To the next generation of owner/manager: – Do you always agree with the current
owner/manager’s business philosophy, management ideas and decisions?
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If Someone Said No, You Are Honest And Need Succession Planning
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If Everybody Said Yes, You Are Probably A Liar Or Kidding Yourself!
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Most Farm and Ranch Situations Require A Detailed Succession Plan
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MOST SUCCESSIONS FAIL DUE TO THE LACK OF A GOOD ESTATE PLAN
Succession Belief 2:
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Not Always • Disagreements about business philosophy • Inadequate earning capability • Transfer of work and management decision
making • Emotional roadblocks • Poor communication • Death, disease, disability, disaster, divorce (5 Ds) • Poor estate plans
18
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ESTATE PLANNING IS SUCCESSION PLANNING
Succession Belief 3:
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False, But What Is Succession Planning?
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Estate Planning & Succession Planning • My perspective
– ESTATE PLANNING is about how assets will be transferred to heirs
– SUCCESSION PLANNING involves discussing so much more: • Estate planning • Establishing the business philosophy rights • Management and workload rights • Determining how the partners will work and communicate
together • Succession feasibility
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Estate Planning Is One Piece Of The Succession Planning Pie
Succession Planning
Other AspectsEstate Planning
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ESTATE PLANNING IS THE FIRST STEP OF THE PROCESS
Succession Belief 4:
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False, But What Are The Steps?
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Succession Steps Succession Participants’
Perspective Concern Step
Estate Plan 1
Financial Feasibility 2
Business Plan 3
Dealing with Emotional Roadblocks
4
Learning how to Communicate
5
Succession Facilitators’ Perspective
Concern Step
Estate 5
Financial 4
Business Plan 3
Dealing with Emotional Roadblocks
2
Learning how to Communicate
1
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SUCCESSION PLANNING SHOULD BE CONDUCTED WHEN THE OWNER WANTS TO RETIRE
Succession Belief 5:
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False, But When Should You Start Succession Planning
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Today!
• On-going process • The actual succession plan should be
developed before the next generation starts working for the farm in a career position
• The plan should be reassessed frequently • Never know when one of the 5 Ds will hit
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DEVELOPING A SUCCESSION PLAN IS A LENGTHY PROCESS
Succession Belief 6:
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True! Succession Planning Meeting Meetings Required
(1/2 Day Meeting)
Team building 1 to 2 Meetings
Communications 1 Meeting
Conflict management 1 Meeting
Business philosophy and strategy Issues 1 to 3 Meetings
Operational issues 1 to 3 Meetings
Financial issues 1 to 2 Meetings
Decision making and work responsibility transition map 1 to 2 Meetings
Estate planning 1 to 4 Meetings
Plan finalization 1 to 2 Meetings
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But It Is So Worth It!
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ONLY BLOOD RELATIVES SHOULD BE INVOLVED IN SUCCESSION PLANNING
Succession Belief 7:
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Grandma and Grandpa (The Past Generation)
Mom and Dad (The Current Generation)
Farming Brother and Sister (The Next Generation)
Non-Farming Brother and Sister
The Brothers’ and Sisters’ Spouses
The Brothers’ and Sisters’ Kids (The Future)
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Controversial, But If The Goal Is To Remove Obstacles To A Successful
Succession…
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It Is Better To Be Inclusive!
• Possible participants – The current owner/managers – The next generation of owner/managers
• Do you really know who wants to be?
– Non-farming heirs – Spouses – The future generation of owners and managers
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OUR FARM WON’T HAVE TO CHANGE
Succession Belief 8:
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That Would Be A Rare Situation! • The farm or ranch has to pay for
– Itself – Its investment – The current owner’s labor and management – The next generation owner’s labor and
management
• The financial risk needs to be assessed
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Grandma and Grandpa (The Past Generation)
Mom and Dad (The Current Generation)
Farming Brother and Sister (The Next Generation)
Non-Farming Brother and Sister
The Brothers’ and Sisters’ Spouses
The Brothers’ and Sisters’ Kids (The Future)
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How Can We Make The Pie Bigger?
How do we better ensure we keep the
pie?
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FARM SUCCESSION PLANNING SESSIONS CAN BE STRESSFUL
Succession Belief 9:
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Yes! • Succession planning can be stressful • It helps to have rules that govern the planning
process
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Yes! • The skeletons will come out of the closet and
the elephant in the room needs to be addressed
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ALL WE NEED TO MAKE THIS WORK IS A GOOD LAWYER
Succession Belief 10:
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Perhaps…
44
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Expertise Needed • Communication specialists • Conflict management experts • Counselors • Mediators • Financial analysts • Lawyers • Succession planning facilitator
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Recommendations • Start as soon as possible • Allow enough time • Use experts • Work on:
– Communication – Emotional roadblocks – Business issues – Financial analysis – Estate plan
• Address the 5 Ds
• Develop planning rules • Be inclusive and
transparent • Map out the transfer of
management power • Make sure the farm can
support all involved and itself
• Print the written plan • Revisit the plan often
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Thank You!
Good Luck With Your Farm or Ranch Succession!