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Who’s going to take over the farm/ranch?

published: September 9th 2020
by: Linda Geist
source: Universityof Missouri Extension

It’s the elephant in the room that no one wants to talk about until the owner dies or can no longer run the farm, says Wesley Tucker.

Tucker is a fourth-generation farmer and succession planning coordinator for University of Missouri Extension. He helps farm families pass management and ownership of the family farm to the next generation.

As the average age of farmers inches toward 60, succession planning takes on more importance, Tucker says. The U.S. Small Business Administration reports that only 30 percent of family-owned businesses survive transition from first to second generation and less than 15 percent make it to the third generation. A USDA study predicts that 70 percent of U.S. farmland will change hands in the next two decades.

Open communication and succession planning help farm families maintain profits and healthy personal relationships, Tucker says.

In most farm operations, family members work their way up the hierarchy. Tucker calls the beginning job in young adulthood “Grunt Level I,” which centers on labor.

Promoted to “Grunt Level II,” the family member takes on even more labor and responsibility for production but never receives management and decision-making responsibilities, especially when it comes to finances. That only happens when the head of the family dies and Grunt II is thrust into the role of CEO.

Tucker guides families through succession planning to reduce this “herky-jerky” ride from Grunt I to CEO. He likens it to teaching a new driver to use a stick shift. “We want a smooth road ahead,” he says.

Families need a road map to help them navigate the twists and turns along the way. That’s what a succession plan is. This road map plots a course around obstacles to help you reach your destination—healthy profits and happy relationships, Tucker says.

It also considers who wants to be active in the day-to-day operation of the farm, who is capable, and who has a say in short-term and long-term decision-making.

Tucker says there are three circles within a family farm: 1) Family; 2) Ownership; and 3) Management and labor. Not everyone in the family will be in all three circles. However, communication among them is critical to the success of the family business. He suggests holding family meetings to keep communication open.

Three types of suggested meetings require a “who, what, when, where and how”:

• Farm operating meetings are for those involved in day-to-day farm operations and cover what everyone needs to be doing. These likely occur informally in the machine shed or around the kitchen table on a daily or weekly basis.

• Farm business meetings cover strategic planning issues for the business and might include non-family members like nutritionists, veterinarians and lenders. Meet often enough to create a culture of group decision-making, and meet away from the farm. This reduces distractions and evens the playing field in family relationships. It lessens the chance that younger family members will fall back into a child’s role while the family patriarch sits at the head of the kitchen table.

• Farm council meetings include everyone with an interest in the farm. This includes spouses, in-laws, grandparents and grandchildren. Hold meetings annually to share information about the family business with those not directly involved with management and labor.

With each, set an agenda to avoid surprises. Identify key issues that require action. Name a moderator and take minutes so that what “we thought we heard” is in writing.

Stick to the agenda. Start and end on time. Someone may bring up worthy topics that are not on the agenda. Stick them in the “parking lot” for the next meeting. Determine ahead of time how decisions will be made, whether solely by the majority owner, by vote or by consensus.

Finally, have fun and share the joys of being part of a family business, Tucker says. Celebrate successes and play together. For couples, set aside time for nonfarm activities. Not every date night should be at a seed corn meeting, he advises.

Tucker is available to speak at events or do free one-on-one consultation. Reach him at 417-326-4916 or TuckerW@missouri.edu

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