Planning for Profits
Working on your farm management skills is like exercising — it pays big benefits, but it’s easy to push it off for another day. Only one-third of producers use business advisers or risk management tools, and fewer still do HR, succession, or strategic planning.
To help make your farm more profitable (and your life more enjoyable), this ongoing series from Glacier FarmMedia combines expert advice with insights from farmers who have gone down this road.
Succession planning all starts with a conversation.
Trent Clark hasn’t formalized his succession plan yet, but the 53-year-old has already had good discussions about succession with his three sons, all in their 20s.
The Vermilion-area grain farmer isn’t ready to retire yet, but he’s already thinking about the topic. All three of his sons are living off the farm, none are farming full time, and while two have expressed interest in coming back, nothing has been set in stone yet.
“I’m not pushing them to make the decision,” said Clark, a fourth-generation farmer. “They have to decide. That’s the tough part, waiting for them to find themselves or decide they want to come back.
“Any time I’ve seen kids expected or forced to come back, that doesn’t work very well.”
Elaine Froese, a farm family coach and succession planner, would support Clark’s reasoning.
In a presentation at FarmTech earlier this year, her talk focused on these sorts of tough issues. One of the first things farmers need to do is think about what they want, she said. And it’s important to realize there are two systems at play on every farm — family and business.
“What I want you to think about today is how is the family doing and how is your farm business doing,” she said “And what is the plan for having that transition conversation around management, labour, and direction; basically succession planning?”
In Clark’s case, he still has a bit of time before he retires and his sons have to make the decision about who could take over the farm.
Clark has gone to many presentations about succession planning throughout the years, and wants to make sure he does things right so that he can avoid the wrecks he’s heard about.
“These experts have horror stories about what has happened. It’s really easy to do a couple of things wrong and it can be an absolute disaster,” he said, adding that didn’t happen in his case as he was the only child who wanted to farm and the succession process proved to be an easy one.
The best way to alleviate a disaster is to have a conversation, said Froese, who also operates a seed farm with her husband and married son near Boissevain, Man.
There’s a lot of fear around succession planning, and not knowing who is going to take over, she said. The issue is further complicated when one generation’s vision does not match up with the vision of the next generation. Typically, the parents are concerned about protecting their own wealth when they pass on the farm to their children. There’s also a fair amount of anxiety about what to do with the non-farming siblings.
Froese urged her audience at FarmTech to ask better questions of each other, and set aside time to discuss the things that matter most.
That’s exactly what Clark and wife Judy have done — discussing succession with their children in a group, and then individually.
“I just need to explain the situation,” he said. “At some point, I need to make a decision. If any of them farm, the decision will go one way.”
And if none want to farm?
“The way I look at it is my dad gave me the opportunity. I owe the next generation an opportunity up to a point,” he said. “But there comes a point where I want to downsize, or retire if I’m by myself.”
Clark would also like to be able to pass on his own farming knowledge to the next generation first hand, if they should continue to farm.
And if that happens, there will be more conversations — and everyone will be involved.
“If one or two of the kids decide they want to farm, you have to sit down with their spouses and you have to be honest about what to expect,” he said.
Again, this is exactly what Froese recommends: Don’t exclude your children’s partners in succession planning.
“Sons- and daughters-in-law have lots to offer and they want to be paid well,” she said. “They want performance feedback and they want your respect. They will work their butts off if they have a hope of an opportunity.”
And Clark has his own expectations. Currently, his sons like to come back to help with harvest and on weekends. But if they want to farm full time, they have to be all in, and so do their wives, he said.
Children often come back to the farm because they want the rural lifestyle or sense there’s an opportunity for them. But if they are treated badly or if their passions lie elsewhere, they will choose to take a job somewhere else, Froese said in her presentation.
“Your kids have a choice to do something else, so stop treating each other badly,” she said.
Farm conversations are difficult, she added, and one of those big reasons why, is because different generations have different perspectives.
In a recent blog titled 10 Things Millennial Farmers Want, Froese wrote about how younger people want to “use their head more than their back,” how they will “reject a lifestyle that is all work,” and often find criticism hard to take.
Clark is interested in generational differences, and notes that he and his fellow baby boomers went through similar sorts of things with their dads.
“We’re a lot more about the quality of life than our fathers were. I think my generation might retire younger or semi-retire younger than our parents did, especially in agriculture.”
Farmers his age will also handle succession differently, he added.
“The late boomers will be exiting and we will do it way differently than the generation before.”
Part of that is driven by the fact that the business side of farming is more complicated these days, with the majority of farms set up under a corporate structure. However, farmers are also more used to dealing with lawyers and financial advisers, and may be more willing to accept those kind of supports, Clark said.
Froese also strongly recommends separating the family part of farming from the business side. She says every family member deserves to have some control in the business and in the succession process. That’s something Clark agrees with.
“You have to give them their space. You still have to be there when they need you. If they are doing things you feel are detrimental to the operation, you have to give them your two cents’ worth, but you have to give them their space.”
There is money available through Growing Forward 2 to help people hire farm advisers. Froese also has a farm family tool kit to help with tough conversations at www.elainefroese.com.