A recent Road Warrior educational experience took place near my own backyard where my business partner and I conducted a two-day business planning session for 10 dairy producers and families. He had a very interesting perspective concerning transition planning as it related to this group. That is, the producers who had the most effective handoff to the next generation or partners were the ones who had planned it out over a five-year period. My teaching partner was exactly right about this point.
Transition planning cannot be a “quick fix” overnight process. Frequently, it requires grooming the next generation or partners with both formal education and experiences that allow them to hit the ground running when the management or leadership baton is passed. This transition planning requires an assessment of the players involved in the business, including strengths and areas for improvement. Too often, the new-generation management returning is a “chip off the old block” with a competitive versus a complementary skill base.
Next, those businesses that were successful in transition knew how to separate business, family and personal issues. First, they established a compensation base with full disclosure of perks and benefits, and values placed on each item. Family and personal expenses were not comingled with business expenses, so the off farm siblings could not quibble over perceived benefits. All agreements were in writing with an exit plan in case the business could not continue. It is interesting note that each of the successful businesses’ older generations had a plan for evolving out of the business with roles and responsibilities spelled out, down to where they were going to live.
Transition planning is a task that can easily be placed on the “back burner” as everyday issues and challenges supersede planning. Often it requires answering tough questions with well-thought-out answers that are in writing. The transition plan that is last-minute can become very emotionally driven, causing logic to be thrown out the door or window. The older generation’s legacy and the younger generation’s future should be reason enough to make transition planning a top priority.
Editor’s note: Dave Kohl, Corn & Soybean Digest trends editor, is an ag economist specializing in business management and ag finance. He recently retired from Virginia Tech, but continues to conduct applied research and travel extensively in the U.S. and Canada, teaching ag and banking seminars and speaking to producer and agribusiness groups. He can be reached at firstname.lastname@example.org.