Farm succession plans start with asking the right questions

By Gord Hawley

One of the hottest topics in the farm community is managing the family farm through a change of ownership. Many of my clients are seeking a "magic bullet" to solve this very complicated problem. There isn’t one!

Every family farm or today’s corporate farms have the same concerns. "I have built this farm business operation up over 30 years and now I want to slow down and pass it on to a younger generation who will continue the farm business and keep it intact."

Each farm business is different and unique in the capital asset base: the number of acres, the quotas if any, the age of buildings and machinery and the knowledge and desire of the owner operators.

When is the best time to start succession planning? If you haven’t started, today is a good day!

When you are young and your children are under age 10 you are not sure if they will have a real interest in farming. As they grow into their teens, hold on, they may settle down and decide farming is a good life. Not all may have the desire – or the skills. How do you want to reward your children with your life’s efforts? Equally? Not at all or something in between?

One of your best resources in helping through this process should be a trusted advisor. Your accountant or lawyer is a good start. My experience in business life has been that too often when you are seeking professional help you don’t know what questions to ask. You need to spend some time getting prepared to ask your professionals the right questions so that you can get the right feedback to guide you through this change over.

The decisions you make will have a long reaching impact on the business’s success. Remember today’s successful farms are "businesses" often grossing more than $1 million in annual sales. You need to think and act more like the successful non-farm business.

Here are a few of the important questions: Will there be enough income to support the two or more families if we do this transition? How will the change fund the retirement of the senior parents until their deaths? Who will make the daily business decisions and what mechanisms will be in place to settle conflicts?

A big question, quietly discussed, is: "What happens if my son or daughter ends up in divorce after the transition? We don’t want the former spouse to end up controlling or forcing the sale of the farm business to settle the divorce."

Often overlooked is the question about the sudden death of an active partner in the business plan, or sometimes worse, a serious permanent injury leaving a key partner incapacitated. Who is going to pay for their work, and how are they going to get compensated after the accident?

And what if, after all the best intentions, it just doesn’t work out? Sometimes life is like that – "the best laid plans of men and mice."

To help you get started I am recommending you read the Managing the Multi-Generational Family Farm booklet from the Canadian Farm Business Management Council. It’s $29 well spent. Read, review, make notes and develop a list of questions you want answered to make your transition work. Order by calling 1-888-232-3262. Tell them Gord said to call!