5 Succession Planning Mistakes to Avoid
It’s time. You need to finally make your farm’s succession plan a priority. As you take a first or second or 20th step in the process, shoot to avoid some common landmines.
“Although there are a lot of scary stories out there about succession planning, there's actually way more positive stories,” says Rena Striegel, president of Transition Point Business Advisors based in Des Moines, Iowa. “I encourage everyone to become one of those positive stories. Take that first step or break through the roadblocks so you can be one of those success stories.”
Listen in as Striegel discusses succession planning with Andrew McCrea on the Farming the Countryside podcast:
Here are the roadblocks Striegel sees farmers commonly face.
You engage only one professional.
“Our philosophy is a farm needs to have a collaborative team of professionals that helps them with the decisions and discussions around succession planning,” Striegel says.
This team can include a CPA, lawyer, business adviser, banker, insurance professional and others. By having all these viewpoints at the table, you ensure your plan is comprehensive and meets your goals.
“I personally do not believe any one professional can come up with a succession plan independent of the other professionals,” she adds. “We encourage farm families to work with their team to develop and implement their transition plan.”
Your plan is driven by tax implications.
Taxes, of course, are a big concern for farmers, especially with the new tax policies coming out of Washington, D.C.
“But if you do succession planning with the sole intention of reducing or eliminating taxes, you actually miss a lot of really valuable tools you could be utilizing if taxes were not the major goal,” Striegel says. “What we try to do with farm families is identify the true goal of the family. Almost always the goal isn't: I want to transition in a tax-effective way. Most of the times it’s about making sure that my operation stays viable, multiple families can support themselves or the farm is going to be here for future generations.”
You ignore the elephants in the room.
Succession and transition discussions are stressful. Most of the time, they will include several topics you’d just rather not talk about.
“We don't want to talk about someone dying,” Striegel says. “There's a lot of things about these conversations that make people feel really uncomfortable. And so oftentimes, even families who communicate well tend to have a hard time being really open.”
If you fall into this category, Striegel suggests working with a mediator or facilitator to help ease the tension and encourage honest and focused communication.
You don’t draw lines between being a family and a business.
“The thing we have found that has really helped farm families is when we can separate the family dynamics from the business itself,” Striegel says. “We try to help families understand when conversations are business discussions versus family discussions.”
In having clear lines between family and business conversations and decisions, she says, you can remove some of the emotional pieces from the equation.
“When we separate those a little bit, it does make it easier for farm families to be able to communicate and make decisions together as a group,” Striegel says.
You procrastinate, procrastinate and then wait a little longer.
The worst option for farm families, Striegel says, is waiting until your farm or family is at a breaking point before seeking help. Don’t wait until a family member is threatening to leave the farm.
“Oftentimes when the family fractures, so does the farm,” she says. “If you think that you're going to need help, it's far better to seek that help out and bring those resources in to preserve your family relationships. Wherever you are, today is the day to start.”
Want to jumpstart your succession plan? The DIRTT Project by Transition Point Business Advisors is an all-inclusive guidance plan to help you transition your farm business. Learn more.
