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New hands, new horizons: transitioning to non-family successors

3.5 min read

They’re not family or staff, but you believe they’re the best option for continuing your farm’s legacy.

Transitioning the farm to someone uninvolved or unconnected with the operation is rare. If there are no children or the next generation isn’t interested, the for-sale sign is usually put up at the end of the driveway, and the bidding begins.

But not in all cases. Joel Bokenfohr, a business advisor with FCC, has handled some of these rare situations. “It’s not as common in agriculture, but very common in other industries,” he says.

As the farming community faces the dual challenges of limited succession partners and the financial barriers for younger generations entering agriculture, it’s clear that other paths need to be explored.

Bokenfohr has seen two scenarios where this occurs:

  1. Passing the farm to passionate non-family or non-staff members

  2. External management to bridge generations

Outside-the-box succession

Passing the farm to passionate non-family or non-staff members can be rewarding. However, the journey to achieving this goal can be challenging.

Bokenfohr says in the cases he’s seen, the legacy of the farm is important. “They are often looking for somebody external with passion to step in and continue that legacy, continue what they’ve spent their life building.”

Perhaps the biggest challenge to achieving this is finding the right person. Avenues to explore include local agricultural organizations or provincial farm succession and land matching programs. It may also be fruitful to reach out to farm transition advisors, or network through farming events and social media.

One key from Bokenfohr is to be clear on your goals from the beginning, which a professional can help with. An external manager can be brought onto farms that have seen considerable growth and bring fresh perspective and clarity. “You start seeing a little bit of external help that has managed these businesses coming in to provide a bit of a gap between parents and children,” Bokenfohr says.

Not only does this make sure that the farm is taken care of between generations, but it also creates a second option in situations where the next generation decides it doesn’t want to take over the operation.

In this case, the manager will have gained considerable experience and understanding of the management and stewardship practices of the farm, which makes them the perfect candidate to enter into a transition plan with the owner.

Planning the transfer

When planning a non-family transition, the first step is to have an equity transfer plan.

When planning a non-family transition, the first step is to have an equity transfer plan.

This could involve a gradual transfer of ownership through financing or discounts, allowing the new manager to gain ownership over time while ensuring the family’s financial needs are met.

Bokenfohr adds that using equity (land, buildings or quotas) can help the successor sustain and grow the farm. In some instances, farms offer stock options or management roles to entice prospective individuals into the farm’s leadership without immediately transferring full ownership.

Regardless of the route, owners must have a clear financial plan for their retirement needs, ensuring their cost of living is met while facilitating the farm’s transition.

Bringing it all together

Succession can be tricky, and transferring to a non-family or staff member adds another layer to an already complex issue.

So why not just sell the farm and be done with it?

The reward of seeing your operation passed to a person you trust to manage it, knowing that your legacy will live on, might be your priority. It all depends on your goals. If protecting your farm’s legacy is a goal, the transition can be easier if you make sure the plan includes you sticking around for the first couple of years so that the incoming owner has the benefit of the extra experience and possibly an extra set of hands around the farm if needed.

If you do move forward with this, remember:

  • Have a plan even before you start looking for a successor

  • Use a professional to help make this process easier

  • Give it time. Make sure you have the right fit

  • Use equity to smooth the transition and help the successor sustain and grow the business

  • Ensure you are taken care of after the transition is done

By making these arrangements, you can balance your financial needs as the retiring owner with those of the successor and ensure the farm’s continuity and your legacy.

From an AgriSuccess article by Craig Lester.