Are you financially ready for farm transition?
A key step in farm transition is understanding the finances of the farm operation and people involved. Answer these questions to help form a clearer picture of your current situation and desired financial vision.
Questions to ask
- What's important in your retirement years?
- What's the true cost of living? How much net income do you need to support current lifestyle and additional retirement needs?
- Do you have a financial cushion for unforeseen events?
- What's going to change in your retirement years that will require additional funds?
- What are your living plans during retirement? For example, do you want to renovate, buy a new house or a new car? Can you afford the payments on your assets?
- Do you have assets you can sell?
- Are there other ways to generate income?
- What assets would you like to leave to your successor?
- What assets would you like to leave non-farming family members? Does this affect retirement goals?
- Do you have a strategy for becoming more involved in business financial decisions?
- Do you have a detailed business plan that outlines your financial needs and future farm plans?
- Is there a need for formal agreements (i.e. operational, partnerships, shareholder) to ensure a solid income from the business?
- Have you reviewed your plans with a team of trusted advisors (consultants, accountant, lender, lawyers)?
- Have you assessed the current owner's financial needs against your business plans? Does it all balance out or do you need to make changes?
- Will you need to generate off-farm income to support the operation?
- Are there investment opportunities for others (i.e. non-farming siblings)?
- How much money is needed from the farming operation to look after the current owner's retirement?
- Can the farm debt service the buy-out with a lump sum and or annual income?
- Will the future plans of the farm be affected after paying out the dollar figure? For example, will expansion plans need to be put on hold?
- Is the farm still able to maintain a good line of equipment and manage barn facilities after paying the current owner?