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The tricky business of preparing the next generation: Part 1

Your Farm Bu

November 18, 2011
From Wayne Schoper and Rich Baumann , South Central College

A major goal of many farm operators is to see the next generation take over the farm business, and to have that business continue to be successful. Often this does happen, but sometimes it doesn't. What causes family business transition plans to fail? Dr. David Kohl discusses several possible answers to this question:

1. Children don't have the work ethic of the older generation. Sometimes the older generation doesn't take the time to train the next generation. Often the older generation is too easy on the next generation and doesn't allow them to make decisions in the business and make mistakes. Dad shelters the next generation and doesn't allow them to take a role in the management of the farm business. They then don't develop the management skills necessary to run the operation once the first generation is no longer in the picture.

2. Sometimes choosing one child over another can split the family. Often there is not enough income to support more than one child returning to the farm business. How do you choose which will be your successor? Do you choose the oldest child? The youngest? Or another child? You need to look at each one's interest in and commitment to the family farm business. You also need to consider your own age, retirement plans, and willingness to turn responsibility to the child you choose. Good communication and exchange of information with everyone is key to keeping the family as a family. Being able to keep peace within the family is often not easy, but is usually the most important aspect of a family business transition.

3. Another major issue that can create problems in the business transition involves the older generation who does not want to retire or take a smaller role in the management of the family farm. We have all seen these situations in our area. Dad is successful and wants to continue to manage the business operation. Sometimes, Dad is sensitive to the fact that there are multiple family members who would like to return to the operation. Rather than offend one or more of the potential successors, he ignores making a decision because he is afraid of making a mistake. Once again, the solution is communication and pushing the pencil. Usually, not everyone can return to the home farm. However, if the operation is to continue into the next generation, the first generation needs to make a decision, then plan his exit from the operation to allow the second generation to mature and make a reasonable living. This is often not easy to do it may be the most difficult decision made in an entire career but putting off a decision can only frustrate all of the family members.



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