5 Ways to Ready Your Farm and Family for a Successful Succession
If you want to see your farm succeed with the next generation of family members, make sure you have the right structure in place – and set it up sooner than later.
There can be huge costs if you don’t set up the structure correctly, say Paul Neiffer, CPA and principal with CliftonLarsonAllen, and Rena Striegel, owner of Transition Point Business Advisors. They hosted a session on farm succession planning during the 2022 Top Producer Summit in Nashville.
Here are five takeaways from their presentation and discussion on AgriTalk.
1. Take into consideration the financial side of the business.
On the financial side, Neiffer says farmers can relieve much of the stress they encounter by having real-time data at their fingertips to monitor their progress and results. That sounds obvious, but too many farmers are still unable to do that.
Accrual financial statements can help you know your costs and monitor your actual costs against a budget, so you can adjust accordingly.
“If you adopt accrual accounting, you will be so much better off,” Neiffer says. “Too many farmers today still aren’t using it.”
If you don’t understand how to implement accrual accounting practices, you’re not alone. Reach out to a farm CPA in your area or online and learn how to put it into practice.
2. Start the succession process while the next generation of farmers is still young.
“The farms that have done succession the best start when the kids are learning the tough stuff – how to pick up rocks and pull weeds,” Striegel says. “You’re stamping out entitlement at a very young age.”
In the process, Striegel says you are teaching the next generation about the psychological ownership of a farm.
“They learn that the farm is theirs to care for and not that it’s theirs to simply benefit and draw (a paycheck) from,” Striegel says. “The next generation needs to understand how to care for the farm, the people and everything around that operation – from the family relationships, to employees, the livestock and the crops.”
3. Give the next generation a combination of responsibility and accountability.
Often, the older generation has a difficult time delegating jobs and tasks to the younger generation. “Often it’s because there’s a lack of trust that the job will be done the way the current generation wants it done,” Striegel says.
But delegate you must, in order for the next generation to be equipped for succession when the time comes to formally transition the farming operation.
Start with small steps and build upon them, she advises.
“Set expectations and know what you’re going to do when they aren’t accountable,” she recommends. “If you can get that level of openness in your conversations when your kids are younger, by the time you get to a transition conversation or a succession discussion, it is so much easier, because you're used to talking to each other. You've already had some tough conversations about behavior or performance.”
Accountability isn’t about keeping your thumb on the person, micro-managing their every move, Neiffer adds.
“It’s being clear about what you expect and saying how you’ll determine whether the expectation is met,” he says. “It can prevent a lot of frustration in the operation and be a real positive.”
4. Play to people’s strengths, even while they’re still youngsters.
If the operation has more than one family member that you expect to take over the farm reins in the future, consider how to equip each person according to their talents and abilities.
Along the way, provide training and coaching.
Neiffer relates his personal experiences about how he and his brother have different aptitudes and that their parents understood that so both boys could succeed.
“In my family, I was the financial person from an early age,” he recalls. “Growing up, I was dealing with the finances with my mother because she had the math brain. My brother did more of the production and learned from my dad. I can drive a combine, but I’m still better with spreadsheets, and that’s OK.”
The important thing is, help your children embrace what they’re good at and emphasize those abilities and skills for their personal development and for the farm.
5. Understand that a succession plan is not linear. Adapt accordingly.
Anticipate that there will be changes on the road to succession for your farm, so adopt an attitude of flexibility, Striegel says.
With a plan in place you have a tool that you can modify to fit what your family and farm need over time.
“Having a plan in place can help alleviate stress, even if things change,” Neiffer says. “Keep in mind that farming is a dynamic business and your plan needs to be, too.”
Hear the complete discussion between Striegel and Neiffer on AgriTalk here:
The Three C's of Succession Planning
Top Producer Summit: Succession Planning: From 'Grunt' to CEO
