Farming is a family affair for many operations, but sometimes family and business are too closely related, according to several farm succession experts speaking at the Tiffin Conference here in early March.
Barrie Broughton of North & Company, Barristers and Solicitors, says even though it can be intimidating and awkward to open up discussions with family about succession planning, there aren’t really that many problems to deal with, and it’s a necessary process.
“The majority of family businesses die with the founder,” says Broughton. “You need to challenge assumptions to make it work, especially if it’s a family business, and don’t wait until you’re 65 years old to begin the planning process.”
As an farm advisor, Broughton has seen the full gamut of farm succession scenarios, and he cited several anonymous examples.
He calls his first example, “26 years of heartache,” a case he’s been working on for several years. It involves a father wanting to split his operation into two corporations – one for each of his two sons.
“It was the father’s dream for the ranch to continue and he superimposed that dream on his family,” Broughton says. “Neither of those sons were farm managers, even though both were good farmers. I’m still wrapping up those affairs.”
The next example is known as “the kitchen window.” It’s an ideal setup: good planning was in place and the timing was right. The youngest took over the farm and all things were going well until seeding time.
Broughton said that while dad is sitting in his house (which is next to his son’s house on the farm), he sees his son loading up his golf clubs into his truck. The dad is furious. His son explains, “Dad, you’ve trained me well, we’ve got the best equipment, I finished seeding two days ago and can’t spray for two weeks, so I’m going golfing.” While dad was impressed, he still found it too difficult to watch the daily operations on the farm from his kitchen window, so he and his wife moved to town.
If they don’t want to farm
Scenario three is called “a good supper.” Farm parents encouraged their children to “go out and explore (other options) and come back if you’d like and we’ll talk about it.” Eventually dad became tired of waiting and his plan was to sell the equipment, live on a quarter section and rent the rest. When one son expressed interest, he and his wife decided to do a trial run. After some time, the young couple took the parents out for dinner and said, “No.”
There were smiles all around, says Broughton, because “everyone knew where they stood.” He encourages parents to “unchain children from the farm. Don’t force them to take over.”
Hence the final example, called “tears in the eyes,” which involves a 55-year-old man crying in Broughton’s office. This man was the third generation on the farm and was basically handed the operation from his father.
“How do you say no to that?” says Broughton. “Twenty-five years had gone by since he took over the place and it was not one acre bigger. The man’s back was shot, he was having heart trouble and was under stress. He had never wanted to be a farmer.” The moral of the story is: “Don’t assume your children want your dreams.”
“If I go back…”
While Broughton used anecdotal examples, John Anderson, an agri-business and farm succession consultant with KPMG, took a business management approach. “The family is soft, business is hard,” he says. “Families should talk about the ownership group and business management, rather than the family group and business management.”
Anderson says assessing a farm operation is not an easy task, as results are not always as expected. It can also be very emotional.
Dick Wittman, a farm manager and consultant from Idaho, relates to the difficultly of meshing family with business. “You never really make a family business team decision until you put it on paper,” he says.
Wittman encourages farm families to complete this sentence: “If I go back to the farm/ranch, my expectations are…” He says sometimes there are large gaps between expectations of potential successors and current owners. “There’s no alignment of expectations because nobody wants to talk about it.”
Farm succession continues to be a topic of interest, as more and more agricultural conferences include speakers about the topic. Alberta Agriculture also hosts farm succession planning workshops throughout the year.