Keeping the farm in the family is something really special.
But figuring out how to share it with siblings and cousins who want to be part of the business? That can get tricky. Especially if the farm is only so big and growth is limited.
“Every farm and family dynamic is different, and the more people involved, the more important it is to ensure every person, no matter the generation, has a voice in the discussion about the farm’s future,” says Darrell Wade, founder of Farm Life Financial Planning Group and farm succession specialist. He explains that in the case of transitioning a farm business with real or perceived restricted growth opportunities, such as a farm operating under the supply management system that relies on quota or a location that prevents expansion, discussions can get sticky.
Read Also
Encouraging people from outside agriculture to come on in
In part three of our Making the Future series, Country Guide spoke with Emily McGovern from South Surrey, B.C. (Read…
But that shouldn’t limit the development of a succession plan that can work for everyone.
Wade sat down with Country Guide to weigh in on some recommended strategies to, what some might call, a sticky succession situation. He answers some common questions that arise in these circumstances and says that the advice applies to everyone on the family farm — no matter their role or generation.
Country Guide: What advice do you have for farm families navigating succession when there aren’t many options for growth?
Darrell Wade: Before we start discussions about farm ownership — including the future, current limitations and everyone’s role — we need to make sure every generation, and everyone interested in the farm business, has a voice. By aligning everyone with a vision, values and goals for the next generation we can start navigating the family business decision-making process together.
The next thing we need to do early in the process, especially in this situation when we know the farm needs more revenue, profit or cash flow, is to support the individuals or families in the business in conducting meetings with purpose. Ideally, a farm would already host an annual business planning meeting that would have identified this succession situation as a challenge or hurdle.
Only then, once everyone feels confident that their voice will be heard and everyone is willing to work collaboratively and respectfully, can the family begin to conduct farm business planning sessions. The goal of these meetings should be to identify new opportunities that could support the farm’s growth, increased revenue, diversification or whatever is necessary to support the future succession of the family farm.
Then, it’s the responsibility of the next generation to identify which, if any, of these ideas can become an opportunity that the farm should explore or attempt. It’s also their responsibility to develop a business plan that identifies details, such as the capital required, level of risk involved, financial requirements, individual responsibilities and return on investment.
By empowering the incoming generation to come to the meeting with a business plan that quantifies these ideas and opportunities, farm families can have more meaningful discussions to determine the next plan or business venture that makes the most sense for the farm to invest in to support multiple family members.
If growth really isn’t an option, I advise farm families to take an inventory of the resources they currently have to find ways to utilize and maximize what is already available. This could include resources that could help cover expenses, or an option to make the buy-in easier by holding debt, like a promissory note with no interest.
Remember, every family and farm situation is different. The ability to conduct respectful and meaningful conversations and meetings, combined with ingenuity, could uncover untapped opportunities for the farm’s future, so don’t be afraid to get creative.
CG: Are there ways a farm can support family members beyond money or financial compensation?
Wade: Absolutely. Non-monetary compensation can be a valuable tool in any transition situation, and especially helpful if income or growth is limited. In some cases, families can provide living expenses, such as a home, vehicle, fuel or insurance. Others may measure “sweat equity” from the time the next generation was involved in a management role until they enter the ownership and equate this to a portion of the farm equity being transitioned. Again, these are all tools that can be discussed during business planning meetings to determine the best fit for the farm and family members.
CG: What can farm families do to keep relationships strong before they even start talking about succession?
Wade: Too often people make assumptions. These can range from anything like believing the farm can’t grow or support multiple family members to an opinion about someone’s skills and capabilities. Assumptions can be dangerous, that’s why open, honest and respectful communication must be at the core of every farm succession discussion.
I encourage farm families to start by defining clear roles and responsibilities. These should be based on their skills, experience and interests and documented to avoid confusion or assumptions. Consider rotating or reviewing roles periodically to accommodate changing abilities and interests and use tools to track tasks and ensure accountability.
Transparency in finances and decision making is also essential. Keep clear financial records that everyone who should have access can review. Don’t forget to include non-financial benefits, such as living expenses, and individual contributions such as financial and sweat equity. A clear decision-making process should also be established and followed.
Regular family meetings are important for open communication. I recommend setting ground rules to ensure everyone is heard and respected. Families should also consider building in conflict resolution mechanisms and engaging a neutral facilitator, like a farm consultant, for contentious discussions to maintain fairness and focus.
There are plenty of other tools and practical tips for families that can help foster healthy, productive relationships and increase the success of the succession. I challenge families to approach farm succession with the goal that they will all want to still sit down and enjoy Christmas dinner together throughout the process and when the farm succession is finally complete.
