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The tricky business of preparing the next generation, Part 2

Your Farm Business

December 2, 2011
From Wayne Schoper and Rich Baumann , South Central College

In the first part of this discussion, we looked at some factors that can cause a family farm transition to fail. What are some strategies you can use to increase the chance of a successful business transition?

One of the most successful strategies involves getting the second generation off the farm. Sometimes it is too easy for the child to stay at home and stay involved in the family farming operation. It is safe and secure there. However, by remaining close to the family farming operation, the first generation second generation family bonds are not severed.

College may not be for everyone. However, by attending college the second generation has the opportunity to further develop management knowledge and see how the rest of the world operates. Not interested in going to college? By all means force the second generation to work on another farming operation in your area or even in another state possibly in another country. Military service may be another suitable alternative to college.

Even if an individual does attend college, an internship in another business or on another farm operation can be a valuable experience. A newspaper article indicated over 50 percent of college graduates have completed two internships or a cooperative education program by the time that they graduate. Another 31% of graduates completed at least one internship. Internships do not have to be on another farm. Being able to see how other kinds of businesses are managed can also be very beneficial. Education in the classroom lays a base for learning in the future. Individuals need to understand that education does not occur only in the classroom but also beyond the classroom.

Internships allow the second generation to build self-confidence and to be held accountable. If you are interning on your own family operation, you're going to see only the part of the operation that Dad feels comfortable in turning over to the second generation. An internship allows the individual an opportunity to compare the intern operation with their home farm and figure out how decisions are made. An internship lets both generations determine in a non-threatening manner whether the second generation has the aptitude and interest for future management and/or ownership roles.

Be decisive you and your spouse must make the tough decision of who, if anyone, will succeed you as manager/owner of the family farm business. You could also decide not to pass the farm business on to anyone, and sell out and take the profits to support your retirement. That is also part of what you must decide. Failing to make this decision may discourage any potential successors from making a commitment to the business.

Hold a family meeting where you and your spouse tell the entire family, including sons- and daughters-in-law, what you have decided and why you made that decision. This is difficult fro many people who often will say, "Let them find out when the will is read." If you do that, you can be quite certain your children will never function as a family again. When you tell them all your plans some may be upset at the time, but will usually come around and the family has a much better chance of being unified in the future. They will eventually realize it was actually your decision to do what you decided, and not influenced by the "chosen" successor.

Some family members may want to sell the business and get the maximum income to them when you and your spouse are gone. They and you need to remember the farm is yours, not theirs, and you have the right and obligation to see that what you want is what will happen. They have no right to what is yours unless you give that to them.

Successful business transitions don't just happen they are planned. If you have family members (or other individuals, maybe a key employee) that would like to join your farm operation, take the time to discuss the economics as well as the training that will be necessary for the second generation to be a successful addition to your farm business operation.

Call Wayne (507-276-5662) at Sleepy Eye or Rich (507-354-7836) at New Ulm to discuss your farm transition situation.



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