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The opportunity cost of prolonging family conflict

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When it comes to farm transition decisions, the risk of doing nothing can be severe.

I took several economics classes in college, so I’ve heard the definition of opportunity cost many times: the loss of potential gain from other alternatives when one alternative is chosen. If you choose this, you give up that.

It’s pretty clear when we’re talking about using our capital expenditure budget to buy a new combine or a new sprayer. But farm families lose sight of the concept when avoiding a big decision about ownership, or succession.

Enduring conflict

I know families that have endured conflict for decades in the spirit of continuing the business in its current structure, to be loyal to their forefathers, to continue the family legacy, to avoid tax consequences, to avoid the turmoil of making adjustments. Avoidance is not a strategy. There is risk in doing nothing. There is a cost to doing nothing—opportunity cost.

What is the opportunity cost of ongoing conflict? It could prevent you from improving the team or reassigning roles to improve business results. If you are mired in upsetting disruptive conflict, it may be affecting mental and physical health of you AND family members AND employees. If you fundamentally disagree about risk tolerance or investment strategies, more benign indecision (rather than all out conflict) may be preventing one party from growing assets in the way they desire.

It’s hard to put a dollar figure on the growth you didn’t get, but would parting ways amicably allow your descendants a different opportunity?

If you’re ready to confront the costs you’ve incurred by not addressing ownership challenges in trust or communication or roles, start defining the opportunity cost of what you’re giving up to keep you motivated.

Davon Cook is a family business consultant at K Coe Isom. Reach Davon at [email protected].

The opinions of the author are not necessarily those of Farm Futures or Farm Progress. 

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