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Serving: East

Sons are ready to grow dairy operation

Holstein dairy cows at feedbunk
EXPANSION PLANS: Waiting a year or two to expand the dairy provides the opportunity to run cash flows and get all pre-expansion i’s dotted and t’s crossed.
Agrivision: Seek advice and wait a year or two before you expand the farm.

My wife and I have two sons. Our oldest son farms with us. We milk 225 cows and farm 450 acres in a limited liability company, and we have a $275,000 mortgage. Our oldest son is a partner. Our youngest son, who is 26 years old, graduated from college and has worked four years off the farm. He has saved $45,000 and says he would like to come home and farm. We've talked a little bit about it, and we're all excited about the idea, but we don't know where to start in figuring out how big to grow our operation. I would like him to work on the farm for a year or two to make sure this is what he wants to do. Our sons say they are ready to expand to 400 cows and build a new freestall barn. We'll have to buy cows and rent some land, and we will need more feed storage. These things take time to figure out. What are your thoughts?

Hodorff: This is a great opportunity for you and your business. My thoughts begin with having your son buy into the LLC. There are a couple of ways to make that happen. I would suggest you work with legal counsel and your certified public accountant. There are different ways and different levels of ownership that can be achieved.

Another issue that will need to be solved is who is the boss, CEO, leader or another title you wish to use? Somebody has to be the head of the business. As your business grows, you will need to make clear responsibilities for managers. With the size of your business, I see labor being provided by owners and some additional employees. That leads to another decision, which is to set salaries for the work being done by owners. Owners do not all get paid the same. Salaries are set by responsibilities and achievement.

Miller: Growing the family business and working on the long-term transition plan can be an exciting time for all members of a family. Evaluating an expansion of the business, bringing on an additional partner and redistributing duties and responsibilities will require thoughtful planning. Contact a qualified dairy business consultant to assist you in this process. He or she will have experience in budgeting for the expansion; site planning for buildings, feed and manure storage; establishment of protocols and management responsibilities; and goal setting for individuals and the business as a whole. This planning process will take time but will greatly increase your odds of having a successful business and good relationships with your family. Good luck working on the planning process.

Hagedorn: I like the sound of taking a year or two to allow your younger son to assimilate into and acclimate to your operation. This will allow the question you posed to be answered to see if this really is what all parties concerned want before the big investing begins. This is also the perfect opportunity to run cash flows, and get all of your pre-expansion i’s dotted and t’s crossed.

I would be remiss if I didn’t mention having discussions on and looking at what new transition management roles and responsibilities will look like relative to the structure (or restructure) of your existing LLC. I wish you and your family the best of luck.

Agrivision panel: Doug Hodorff, Fond du Lac County dairy farmer; Sam Miller, managing director, agricultural banking at BMO Harris Bank; and Katie Wantoch, Dunn County Extension agriculture agent specializing in economic development. Filling in for Wantoch while she is on maternity leave is Mark Hagedorn, Eau Claire County Extension dairy and livestock agent. If you have a question for the panel, send it to: Wisconsin Agriculturist, P.O. Box 236, Brandon, WI 53919, or email: [email protected].

 

 

 

 

 

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