Can you find a new farm owner who is not a family member?

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I was recently asked to assist an area farmer sort through the complexities of his farm transition plan. This farmer worked hard all of his life, built a successful diversified farm and, as he approached retirement, began investing considerable time and energy into how best to transition his farm business.

Discussions with his children revealed that they had no interest in managing the farm. However, there was consensus that, if possible, the farm should continue in operation, be profitable and maintain its reputation in the community. What to do?

Nonfamily transition

In this case, some key employees had expressed interest in assuming the ownership and management role. Interviews were held with each interested employee and his/her family to discuss their goals and level of interest. The interview process resulted in a husband and wife both employed by the farm as the most likely candidates.

For many, it’s ‘out of the box’ thinking to consider having someone outside the family assume the ownership and management of a farm, but it may be a viable option to consider.

Interviewing potential successors takes time and energy. It’s helpful to take notes about each interested person. These notes will be helpful as you reflect on the discussions. Some may find it helpful to rank each potential successor against a variety of items. I’m sharing a table from the Ohio State University Extension Fact Sheet, Developing the Next Generation of Managers.

I encourage you to use this as a starting point to evaluate candidates interested in operating your business. Feel free to add additional attributes that are important to you.

9.24 dairy excel chart

Management savvy

For a potential successor to be successful, they must assume management responsibilities. An excellent way of providing initial guidance to your successor is to involve this person in current decisions.

Provide this person with a current problem and all the facts you have. Allow them to work through the problem. Ask questions as to why they do/did something a certain way. Ask them situational or ‘what if’ questions. This should not be confrontational, but rather an opportunity for you to understand how your successor makes decisions.

Give them opportunity

Allow your successor to develop and use management skills early in the process. Managing a parcel of land or an existing enterprise are good examples.

All decisions, including purchasing, finance, marketing, and personnel management should be transferred. The current farm manager should be available for consultation, but should not dictate management decisions.

Letting go

For some, one of the most difficult parts of the transition is letting go. Anyone who has worked hard to build and manage a successful business worries about its future.

Peter Drucker, a well-respected management author, once said that it’s the job of the manager to pick his or her successor and get out of the way to let the successor run the company. For some, easier said than done, but it is a true statement.

Be confident in the abilities of your successor and know they are committed to the long-term profitability and success of the business.

Ohio State University Extension has an extensive list of fact sheet references related to farm management and transition planning, including:

  • A Comparison of Business Entities Available to Ohio Farmers;
  • Conducting a SWOT Analysis of Your Agricultural Business;
  • Conducting Successful Family Business Transition Meetings;
  • Develop a Useful Mission Statement for Your Agricultural Business;
  • Developing Goals for the Agricultural Business;
  • Developing the Next Generation of Managers;
  • Planning for the Successful Transition of Your Agricultural Business;
  • Starting, Organizing, and Managing an LLC for a Farm Business;
  • Tax Characteristics of Business Entities Available to Ohio Farmers;
  • Using Liability Limiting Entities to Manage Liability Exposure to Ohio Farms;
  • Is a Prenuptial Agreement Right for Your Farm Business?;
  • Whole Farm Planning Model

Copies of these publications are available at http://ohioline.osu.edu or from your local county Extension office.

 

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