When I ask farmers to guess how long it will take to complete a transition plan, they usually say one to two years.
The reality is that it takes much longer.
In a 2017 survey by Business Development Canada (BDC), five out of six entrepreneurs believed that the transition process can be completed in two years or less. Ironically, the survey also found that business succession plans can often take up to a decade to implement.
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That’s because most people think a succession plan is simply a bunch of legal documents signifying change of ownership.
But it’s much more than a single transaction.
If you choose to sell the farm you’ll need to plan for taxes, housing, retirement and your estate.
If there is a next generation to take over the farm business, it gets even more involved. A series of co-created agreements, including everything from compensation, roles and responsibilities, housing, training and even prenuptials or cohabitation agreements, should be drafted.
In conjunction, you will also create a new business plan, estate plan and a retirement plan — all of which need to be communicated to farming and non-farming family members.
Succession is one of the most complex times for a business and family to navigate in a lifetime, so it’s important to give it the extra time and effort it deserves.
More time often means more choices
When changes are rushed or forced, they tend to be rejected or opposed, and stress levels naturally increase. There is denial and resistance and emotions erupt.
Succession is a non-linear process. Be prepared for some sidesteps, gaps and evolving relationships from parent-child to business partners. Fortunately, it’s often in these gaps and missteps where I’ve witnessed people learn the greatest lessons, especially that of self-awareness.
Allowing more time to transition through the process can allow for setbacks, stalling and something called “succession fatigue.” Long-time Canadian farm family coach Elaine Froese calls this “getting stuck.”
A slower succession process can also provide time to build off-farm investments, diversification of enterprises or additional education and experiences.
The RBC report, Farmers Wanted, identified three skills future farmers are going to need to be successful: technology, business/finance, and people management and leadership. Slowing down the transition of responsibilities can allow the next generation to apply and learn these important skills, before handing them full responsibility and ownership of the business. This period is when the next generation tries new skills and ideas, gathers information and their own support system, builds confidence in their own abilities and learns from their mistakes.
What the BDC survey didn’t explain was that there is power in this slow, complicated process. By braiding together agreements and plans, the results will be stronger. The next generation will acquire much needed skills and knowledge, and the outgoing generation develops trust in these skills. It also gives everyone time to adapt to and accept these massive changes.
Eventually, over time, with support and communication, the change is understood and integrated. Remember, too, that staff, non-farming family, advisors and suppliers are affected by your farm’s management and ownership transition, so give everyone space to process and accept the change.
Adjustment period
Too often farmers procrastinate until a big life event forces succession planning action. The amplified emotions during these events are not a healthy environment for making good decisions, for learning or for accepting change.
There’s value and power in the process of planning for both generations. Good planning requires informing, discussing and collaborating, which takes longer than an individual making decisions alone. Recent research shows these strategic discussions result in more robust, profit-driving decisions and are fertile training ground for future leaders.
The outgoing generation also needs to learn new things as they shift from doing tasks to training, mentoring and encouraging the next generation on how to do them.
The outgoing generation needs extra time to work on overall long-term strategies for the business, fitting into their new roles, preparing themselves for a different sort of life and developing new passions. Like a retiring athlete, the exiting generation of farmers see their farm as a key part of their identity and fear a loss of purpose. It’s important for their health and well-being to give them time to adjust.
Both generations need to understand that change, even positive change, can be difficult and emotional and it takes time to build trust and confidence. Agreed on timelines can be helpful guidelines for the transition of skills and allow for the whole family to emotionally accept the change.
Instead of cramming in succession plans, take the time to build a smoother transition. It will be time well spent.
Timelines are guidelines
To help get your head around and guide this complicated time of change write out a transition timeline.
The outgoing generation can start with a line from their current age up until 85 years old, the average age of death in Canada. Mark down important points, for example, when you turn 60 and 65 or when you no longer want to milk cows or be responsible for grain marketing. Make sure you include other key personal events, such as when your spouse is retiring.
The next generation should draw a similar lifeline from their current age to 65 years old, marking down key events and indicating any debt payment due dates.
Take a moment together to compare the two timelines — and make sure to do it in pencil. There are no guarantees about absolute dates. This is simply a way to think about your dreams in terms of our most limited resource: our time on this earth.
The future awaits.
