A multi-generational (six-generation) agriculture business that had been passed down from parents to their three sons engaged a succession planning expert. The three sons were married and had adult, married children, and young grandchildren. The expert started the process by having individual conversations with each family member.
Through the course of starting and facilitating conversations, they were able to get to the bottom of what was causing tension in the family. They were able to determine who had a true interest in the business and where the financial stability of the business stood for the next generation. The process helped them designate which kids, and at what ages, would enter into the business. The family also agreed upon future technology considerations that could impact both efficiency and profitability for the business.
Had this family not started the succession-planning process and had those conversations, the business, and its legacy could be in jeopardy as tensions would continue to build around the uncertainty of the future. This healthy ag business could have easily fallen victim to the 97% failure rate statistic that is the startling reality for a sixth-generation business transition today. This family is just one example of how today’s ag landowners must consider how they will transition their land and assets and who will take over the business.
Why is planning for change so important for multi-generational family businesses?
Not having discussions about the future or failing to develop a succession and estate plan is a recipe for failure. Family ag businesses must still reckon with life’s inevitable events, such as marriage, divorce, death, and business changes. Unfortunately, most businesses only act when there is a sudden illness or untimely death in the family. These further underscore the need for family ag businesses to get serious about succession planning.
There are far too many stories of ag businesses that have fallen apart or families that lost the farm because the kids fought over the land. With that comes unnecessary litigation or accounting expenses – and a future of family bitterness.
With so much at stake, it’s essential for U.S. farming and ranching families like the one mentioned above to chart a clear path forward. Determining who will succeed you, deciding what to do with your assets, and minimizing estate taxes will remain vital for protecting and preserving the generational wealth of family-owned farms and ranches.
How does a family make a good succession plan for their business?
A good succession plan helps multi-generational family businesses determine what their future will look like. It’s developed through a process of collaboration and consensus. It involves hard questions and difficult conversations:
- How can we successfully transition our business to the next generation?
- Do we stay together or sell out all together?
- How should we handle siblings or children?
- When should we take ownership and manage changes?
Succession planning issues are the same everywhere, in every family.
Also important is estate planning, which provides the mechanics to implement the succession plan.
Contact a Pinion Next Gen advisor to discuss planning for change in your family business.
For more on this and other key trends in American agriculture, click here to read From Policy to Plate: An Outlook on Agriculture.