Farming is hard work and often a risky venture. It also demands much of the farmer’s time, leaving a perception of a workaholic who garners few rewards. It is also not a glamorous job and does not appeal to the masses. With the deck stacked against them, it is a wonder farmers succeed at all. Limited interest has led many farmers to turn to the next generation, their children, to take on the family business. Unfortunately, growing up on the farm has not inspired second generations to pick up where their parents left off.
Selling the Next Generation on Farming
Second generation farmers represent an important stepping-stone between the ruthless first steps of building a farm and its potential golden years of prosperity. Second generation farmers do not have to contend with crippling farm debt, loans to pay for machines, and so on. Nevertheless, the next generation balks at the lifestyle change. Even if the assets are stable, the shift to living on a farm is significant. Their fear of failure is also paramount.
However, future farmers have a significant advantage over their parents. Back in the 1960s and 70s, there was a massive back-to-the-land movement. For one of the only times in recent history, rural growth outpaced urban growth. However, these would-be farmers were entering unknown territory blind. They had no scientific data and next to no communication options. Next generation farmers have all the benefits of an established farming operation plus a wealth of information. The explosion of information across the web has made farming success easier than ever.
Creating Succession Where None Exists
Not all farmers have obvious heirs to their enterprise. When this is the case, many wait until it is too late to establish a line of succession. If a farmer does not have a clear line of succession, that individual needs to start planning sooner rather than later. Waiting to establish an heir until retirement means extended working years and a higher chance of failure.
To do this, most farmers look to their existing workers. Many farms have shining stars amongst the plethora of employees. Once farmers begin the conversation of transference, they can draft an agreement on how to shift their chosen heir from employee to owner. Most farmers start by giving 10% ownership to their employee and sign over a small percentage each successive year.
The process is slow for a reason. All relationships take work, and grooming an heir is no exception. It is less of a complete takeover and more of a partnership. For several years, if not decades, the transference process will look more like business partners working side by side than an owner retiring. This process is difficult, but Cline Wood can help. If you are struggling with retirement or farming succession planning, contact us today.
This document is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting or legal matters are based solely on our experience as consultants and are not to be relied upon as actuarial, accounting, tax or legal advice, for which you should consult your own professional advisors. Any modeling analytics or projections are subject to inherent uncertainty and the analysis could be materially affective if any underlying assumptions, conditions, information or factors are inaccurate or incomplete or should change.agribusiness blog, agribusiness risk, farming risk, generational agribusiness