Stepping into transition together
How does transition planning begin? By broaching the subject, of course.
This might seem intuitive, but for Jeff Davies, a Farm Credit Canada ag-transition specialist based in southern Ontario, it’s the way in which transition discussions are managed that determine effectiveness.
Devote time to strategic planning
For farm families just starting to discuss transition, Davies says it’s helpful to designate time to discuss that issue alone.
Day-to-day operations, he says, tend to overshadow long-term strategic planning, making it more difficult to effectively address the latter.
Indeed, he believes scheduling several meetings throughout the year exclusively for strategic planning is a valuable approach for families at many stages of the transition process. After those meetings, when concerns have been aired, is the time to take the next step.
“Once you feel you’ve got something to bring forward, that’s the type of material to bring to the advisory team,” Davies says. “An advisory team isn’t there for you to belly ache about the tractor being too old.”
Who goes on your advisory roster?
The advisory team, says Davies, is a trusted group of people who can help work through uncomfortable or confusing aspects of transition. This can include lenders, accountants and other ag professionals. Ideally, such individuals have also seen how other farm businesses worked through similar circumstances.
Give yourself permission to not know where to turn and to be uncertain about the whole process.
This kind of council can also be invaluable when tensions arise. Generations may not see eye-to-eye because emotions are interfering with communication, Davies says, and a third party can help find agreement in a business-sensible way in such cases.
“Give yourself permission to not know where to turn and to be uncertain about the whole process,” Davies says. “You don’t have to be alone in this. Everyone’s family farm is unique, but you all have the same concerns, the same issues.”
Ask others what matters
Fundamentally, Davies says no transition planning can begin if each stakeholder is unaware of what the others need and hope for.
For the younger generation, an early question to ask might be whether their older counterparts have a “growth or harvest mentality.” That is, whether they want to become a multi-generational business, or liquidate assets.
“It’s a fair question to ask. There are some families that would prefer to sell the farm and spread the wealth over the family,” Davies points out.
He adds the older generation should be prepared to discuss money, which means having a clear understanding of the farm’s long-term finances, not just year-to-year numbers. Knowing this is critical to answering questions, such as whether the business can support more than one household.
“Parents tend to hold their cards close to their chest. Their hearts are in the right place because they don’t want the value to take control of the situation,” Davies says.
Critically, Davies stress the importance of engaging every family member, from the start, to establish clear goals.
“Every family member is a stakeholder,” he says. “Have goals prepared. Any help will ask what you want.”
Experts say it’s essential farmers designate time to discuss strategic planning, establish a group of trusted advisors and ensure all stakeholders are asked about their needs and hopes for the farm. The foundation of any farm succession plan, experts say, rests on establishing overarching goals, being realistic with financial realities and looking beyond day-to-day operations.
Article by: Matt McIntosh