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The Boom In Succession

Meet The Family

It’s one thing to know you need to do a better job communicating. But how do you actually get started?

When I ask her to tell me a skill that families need to manage succession, Tamara Fraser’s answer is researched and personal: “Communication is the most important thing.”

Fraser studied farm succession as part of her online Masters of Business Administration through Athabasca University a couple of years ago. Her applied learning project touched on all aspects of farm succession, including resources and tools to manage the financial and the emotional parts.

She’s also personally involved in the process of transferring a business. Her project crossed over with reality on about 8,500 acres in southwestern Saskatchewan, her husband’s family’s farm.

“Shawn’s family doesn’t scream communication but they’ve been amazing,” Tamara says. “Even as the daughter-in-law I am a part of the planning process.”

Being an integral part of the succession process and taking the financial leaps required to farm today have engaged the young mother to become more hands-on. This fall Tamara spent 47 days on the combine, harvesting some 5,500 seeded acres with her father-in-law, Scott. In true family-farm style, her mother-in-law, Bev, looked after their three children and kept up with meals and the farm books while they were in the field, and Shawn worked in the family’s secondary business in oil-field construction.

“Having ownership in the combine helped give me the confidence to drive it,” Tamara says. “If I wreck it, at least I own it.”

Tamara grew up and worked on farms and in her former career as CEO of a small hospital she has dealt with large operating and capital budgets. However, becoming an integral part of the farm and the succession process has made it easier for her to deal with the craziness of farming cycles.

“Even when I was working in the hospital there was a disconnect,” Tamara says. “I understood that the money is in the field and it needs to be in the bin but it’s different if you’re out there harvesting it.”

Unfortunately, the high interest rates in the 80s chewed her family’s farm into bankruptcy, and dealing with that lost opportunity, not the fear of failure, has been the most difficult part of the succession process for her.

“I swore I wouldn’t come back to a farm,” says Tamara. “If Scott and Bev didn’t support my involvement, and instead held me at arm’s length, I don’t know if I could do it.”

To fuel the succession process, Scott and Tamara went to a presentation by someone Tamara had read about in her research, Elaine Froese. Froese, an author and conflict resolution coach from Manitoba, said it’s very motivating to share the reasons why all family members are important to the operation.

So when Scott drew Tamara’s name in the Christmas gift draw, he tucked in a letter telling her why she was important to the family farm and to them. This quiet communication still chokes her with emotion. “It’s amazing to feel so valued,” she says.

To help them deal with the daunting barriers and processes the Frasers ended up hiring Froese. “Bring in resources and start somewhere. Whether that’s with communication or having an insurance agent or a lawyer or an accountant, pick a spot and start,” says Tamara. “You can only eat an elephant one bite at a time.”

For their start, each of the Frasers shared their goals with Froese individually. Then they met as a group to try to make those goals compatible with each other. Now the four partners meet weekly to talk about operations, and meet monthly on the nuts and bolts of succession.

“Planning is fertile ground for communication,” says Tamara.

For Shawn the hardest part was starting because it seemed so huge. “Continuing to make the time to discuss it has been key,” Shawn says. “It takes a lot of time to get through it all but the continued effort by everyone acknowledges the importance of it.”

The Frasers have always approached their farm as a business and that attitude still has power. “Corporations outside of farming have regular staff meetings, why not farms?” says Bev.

They have an open agenda prepared so everyone comes ready to discuss each topic. Bev says it has become easier with every meeting, and it’s important to not take opposing view points or opinions personally. At these meetings, everyone’s opinion is equal. Whether it’s from an engineer like Scott or from Tamara who’s new to the farm, they consider each idea.

“Change, facing reality, and talking about it takes courage,” says Bev. “It’ll never be perfect but in the end, we know that we care about each other.”

The Fraser children made their career decisions as they went along, knowing their parents were open to succession. Froese suggested all the family, including Shawn’s two siblings and their families, meet a couple of times a year. Again, it’s fairly formalized. They rotate who organizes the meeting, and everyone is asked for agenda topics ahead of time.

“Mostly it’s a time set aside to share what everyone’s up to goal-wise, including the farm,” says Tamara. “These meetings have brought us closer together.”

At the first family meeting, they discussed the value of the life insurance benefits and how much of a financial commitment Shawn and Tamara have taken on. Scott also made sure that everyone knew how much Shawn had contributed to the farm in energy, time, ideas, manpower and enthusiasm over the years.

“It’s emotional and there’s attachment. It’s where you grew up,” says Tamara. “If you talk about it, there’s less likely to be resentment after.”

With the lessons of succession fresh in their minds, Tamara and Shawn are making decisions now that

consider whether their own children will want to farm. They’ve updated their wills and bought joint-first-to-die insurance… and they’re only in their 30s.

Share It Forward

Being open to sharing the numbers sets all sorts of good things in motion

About 1,700 miles east of the Frasers, the Campbell family is going through similar decisions. Andrew and Jessica, and Andrew’s parents Wayne and Phyllis, are mid-stream in their succession plan.

Like the Frasers, the older generation is relatively young, not even at retirement age, and they are stretching to lead the group through this transition. And also like the Frasers, the younger generation has invested heavily in the farm

“Going forward, open communication and openness is going to be one of the keys,” says 25-year old Andrew. “As long as I know what their concerns are and they know mine, we can deal with them.”

The Campbells’ 42-cow, 400-acre dairy farm is southwest of London, near Appin., Ont. Andrew and his wife Jessica both work full-time off the farm and live in the farmhouse his great grandfather built. Currently, they’re responsible for the dry cows and for the heifers housed there, and they milk on the weekends. Phyllis and Wayne live and milk cows on the other farm and both families share the fieldwork.

Like their western counterparts, Wayne and Phyllis know the pain and pleasure of working with family and farming. So five years ago, when Andrew told them that he was interested in farming with them, they understood why he wanted to work at something he loved surrounded by a supportive family and community.

Of course, they were worried about the future and how the farm could support two families and carry more debt for expansion. After hearing intergenerational horror stories about other farmers, they were afraid for him, the family and their farm. Sound familiar?

“Don’t sell the quota out from under the kids,” says Wayne. “If you’ve had it this long, you might as well give it a chance until they’re 25 or so, when they’ll have a better idea.”

Instead of letting those concerns derail the process, the Campbells decided to be open right from the start.

First they shared the farm’s financial information with Andrew and Jessica so they knew exactly what they were getting into. The great stumbling block for many farm families, especially those with quota, is that the asset values tied up in the farm do not remotely reflect the earning capacity.

Like the Frasers, they also showed the financials to their other children, so everyone understood the farm’s financial position. They meet periodically as a whole family around the kitchen table so everyone knows where they are at in the process. It helps that the children are close, texting, telephoning and e-mailing each other daily.

“I have understanding siblings,” says Andrew. “While they enjoy the farm, they are not interested in taking it over.”

The two generations know they need to expand the operation to accommodate another family. Their succession was kick-started with a plan to build a larger barn and buy quota. However, two years ago, those plans took a big right turn when an uncle’s farm came up for sale. Instead of barn building, they invested in the nearby farm where Andrew could live and raise heifers.

They were open to the opportunity and the expansion happened, just not in the way they had originally planned. With the cap on the value of dairy quota and the subsequent decrease in the amount available, the Campbells wouldn’t have been able to buy quota to fill a new barn anyway.

Phyllis sighs heavily. “If we had continued with that plan, we would just have finished the barn and then couldn’t fill it with cows.”

The whole process of discussing and examining their farm has been worthwhile, says Wayne. Especially helpful was having a farm financial adviser benchmark their operation and compare different expansion methods. Plus they switched to an accountant who is more specialized in agriculture so they can run plans by him.

Andrew works off-farm full-time at Farms.com and previously worked as a farm editor at a radio station in Wingham, Ont. This experience has given him knowledge he wouldn’t have had if he had come home right away.

Andrew does all the grain marketing for the farm, and has helped them focus on parts of their operation to increase their margins. They’ve isolated and improved their calf program and invested in embryo transfer.

Simply by Wayne asking Andrew for input on big decisions, and by really being open to questions and future considerations, they have made progress. “Open communication is a big part,” says Andrew.

“He’s so keen and he pays a lot of attention to new things,” says Wayne. “We appreciate each other more and he appreciates what we’ve got more now.”

Like the Frasers, communicating didn’t come naturally to this family. “Wayne hasn’t always communicated well,” says Phyllis. “But now he has to stop and think about it and explain it to Andrew so we often find better options in that process.”

Typically they chat every morning, often at least twice a day whether he’s working, on the road, or at home. “They’re great at keeping me in the loop as to what is going on around the milking barn,” says Andrew. “It makes me feel part of the team, even though I’m not physically there as much as I’d like.”

Although they’re not legally done yet, most of the succession plan details have been worked out with Andrew and Jessica. Now Wayne and Phyllis are trying to decide the best way to give something to their other three children. “We don’t want to be unfair to our other children or load the farm down too much to function,” says Phyllis.

The Campbells admit to being a little bogged down in the process. “Taking the time to do the planning is always difficult,” says Phyllis. “You just get haying done and harvest comes along.”

So far, they’ve been able to plan for a lot of good and bad situations. A dose of humour and humility has helped get them through discussing the awkward topics.

“I need to know what Mom and Dad need and plan for from today until the day they pass. They need to know what I need from today until the day they pass,” says Andrew. “If their plan for retirement, and my plan for the next 50 years fit, then we’ve got a start.”CG

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Canada’s baby boom generation has dominated our agriculture for decades. Our biggest generation ever, they have transformed our farms beyond imagining. But now they’re stepping aside.

Before they do, they need to make what might well be their biggest contribution of all. Our baby boomers are the first generation to think of passing on the farm in terms of a succession plan -not an estate plan. All the disputes and hurt feelings that used to erupt after the funeral now happen while Mom and Dad are still in charge. But so can all the positive outcomes.

On the farm, it’s how those baby boomers lead their families through this minefield of emotions that makes or breaks this process.

Historically, farmland changed hands when it was willed to the eldest son or the child that stayed home to run the farm. No discussion, no planning, generally no women, and sometimes no ownership for the next generation until they were old enough to retire.

Today, for the most part, that’s changed. Farmers are living longer, many farm assets are incorporated, gender equality is a given, the next generation usually has another job before they come home, and the transferable assets have a staggering value. With these changes have come new sets of players and new rules, and the ones running the game need new skills.

We select our successors and expect them to improve their skills to run our farms, but the boomer generation may not always ask the same questions of itself. What does the older generation, generally Mom and Dad, need to be good at in order to make succession successful?

Below, two families, a grain farm in Saskatchewan and an Ontario dairy farm, are charting their path through succession. Both are immersed in the process and neither is done yet. Their stories are inspirational, they are practical and they are totally attainable. You are not alone.

———

BE A VISIONARY

Both generations must envision and eventually agree on three elements, says Larry Morin, farm financial planner from Fort Saskatchewan, Alta. That includes the transfers of ownership, management control and labour. To help get the ball rolling, Morin often opens the discussion between generations by asking these four questions.

1. What do you expect your role in the future of the farm to be?

Who will own what? What will each person’s responsibilities be for the farm? How much time will they spend doing both farm and off-farm activities?

“If you can get a pretty accurate picture of how they vision the future, you can work towards that as the basis for your succession plan,” says Morin.

2. What is the most important issue to be resolved with this succession plan?

It can be quite revealing to understand each other’s vision and each person’s expectations. They do not always match what they thought the other person wanted.

“All things being considered, the most important aspect of the entire process is that the principals must have a strong desire to see it through,” says Morin.

3. What other concerns do you have that you want addressed during the succession planning process?

Try to keep the focus on business and know there are likely areas where skills or knowledge are lacking. Everyone involved — younger and older — needs to be open to learning to deal with everything, from financial management decision-making to adapting new technology.

Creating a timeline for the creation and implementation of the succession plan is important, but there aren’t any magic formulas. “It normally depends on the successor’s comfort level with the passing of the management of the farm,” says Morin. “Depending on the family dynamics, the vision timeline may be relatively short or in some cases include several years that encompass more than one generation.”

4. What do you expect to happen to the farm assets if the farm ceases active operations?

The first step is for all parties to understand the financial condition of the farm and the succession plan’s impact, Morin says. People may have lots of ideas as to how they think things will look after succession, but if the financial capacity of the farm is unable to support their plan, it’ll fall

apart quickly.

“The financial capacity must be understood to ensure that each person’s expectations are realistic,” says Morin. “You want to ensure the plan has some possibility of success and changes can be implemented to increase the financial capacity to get closer to each person’s goals.”

About the author

Senior Business Editor

Maggie Van Camp

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