The Succession Plan
The Succession Plan
My day job as an Agricultural Finance Specialist has given me the opportunity to work with a number of clients on succession planning over the past few months. It tends to be one of those ‘winter tasks’ that people procrastinate about until time gets short and farmers start thinking of heading back out to work the land. Usually done in conjunction with that mandated annual trip to the accountant (I have to pay HOW much tax?), and a seminar put on by your local financial institution, it always seems like an important farm issue that is difficult to deal with.
I think ‘succession’ planning itself often gets confused with ‘estate’ planning. ‘Succession’ is the passing of a business on to the next generation. ‘Estate” encompasses all your assets. Farmers probably have the most difficulty differentiating between the two, as often the farm operation consists of the bulk of the farmers’ assets. It is not like too many farmers are complaining about sitting on piles of cash/stock/investments these days!
Maybe a better description of a succession plan is – do you want your farm to continue without you? If the answer is yes, then you need a successor (and a plan for them to take over). If the answer is no, then you will be selling / winding down your farm at some point, with the assets becoming part of your estate.
One of the tips I heard this week: Look for a successor that has a ‘fire in their belly’. The thought is, that if they are unsure/unclear/uncertain about whether they want to be involved in the family operation; maybe the time/fit just isn’t right. A successor should have a strong vision for where they want to go; and a drive to get there.
Probably the most important part of the succession plan of any farm is communication. Whether it is between spouses, generations, in-laws or non-farming family members, ensure everyone is on the same page; awareness of what the plan is, is essential for family harmony. Everyone may not necessarily get to have a say in the process, but the situations that tend to work out the best, are those in which all stakeholders are aware of the plan. This way, hopefully the number of misunderstandings can be reduced, and the thought process behind the decisions that are made can be shared.
I think succession planning can also relate back to the purebred herd. Having a plan in place to replace that elite cornerstone cow or walking herd bull, well before their time is up, can allow for an orderly transition. For females, it may mean retaining a top daughter (and passing up the publicity and prestige of having a possible high-seller), to eventually replace her dam. The other option would be to continue to sell that same daughter, but re-channel those funds into the purchase of another elite breeding line. Having different options (and, potentially, embryos in the bank) can form a sort of insurance policy, and ensure that the walking cow base stays strong. The idea though, is having a plan in place to ensure there is no ‘hole’ in the herd when that matriarch does move on.
Due to their major genetic impact, the herd bull side of the equation is probably even more important. A herd that doesn’t have enough bulls to cover the cow groups can find themselves in real trouble in a hurry. Generally for purebred herds, it is tough to find a replacement at the drop of a hat. Having a succession (or back-up) plan in place before you need it can diffuse the situation, and provide the time and space to fix it exactly how you would like it. For the second consecutive year, we are on ‘Plan C’ when it comes to our walking bulls (knock on wood, but we haven’t had to utilize Plans D or E yet).
I guess though, what it really comes down to, is that planning is great. But after you have a plan, it is ‘the doing’ that counts. Having a rough succession plan, whether it is the farm or with cattle, is important, but it needs to move forward.
Hope for the best. Plan for the worst. But make a decision. Make sure everyone knows about it. And move on.