Written by Wesley Tucker, Farm & Ranch Transition Specialist, University of Missouri Extension
Do you have a plan for how your farm will transition from one generation to the next? I mean a plan that does not include the keys and the checkbook simply changing hands the day after the funeral? According to the 2022 Census of Agriculture 38% of farmers today are 65 years of age or older. Nearly 40% are already at or beyond what some would call normal retirement age. We can debate whether farmers actually retire or not, but the truth is most operations have no real plan how things should transition, except at death. When I go on vacation, I use a roadmap to help my family get from our home to the planned destination. A succession plan is a roadmap for transitioning the business from one generation to the next. I help families work through five phases of slow, gradual transition.
Phase 1: Send them Away
I always encourage kids to go away before they are allowed to come back home. That does not always mean extra schooling. But I want them to go acquire additional skills they can bring back to make our operation better. They also need to learn how to work for someone else. I hope they get to work for a good boss and a bad one, so they can see the difference.
Phase 2: Trial Work Period
This is a short period for testing our ability to manage the friction between family and business relationships on the farm. Sometimes we discover the friction between family and business roles is too much. If we continue to force the business relationship, we may destroy the family ones. Deciding it’s best to farm separately should not be viewed as a failure, especially if it protects the harmony of the family unit.
Phase 3: Beginning Management & Ownership
Your successor needs to start managing a small portion of the business and getting to earn or buy an ownership share. It is both management and ownership.
Any good supervisor knows the best way to develop an employee is slowly give them more responsibility. As their successes grow, they can be put in charge of more. It’s the same with farm succession. As your heir learns and gets more comfortable managing segments of the business, gradually let them take on more and more responsibility. Let them start managing one of the rental farms as their own or put them in charge of heifer development. But they need to be leading something they can call their part of the family business, not just working as a glorified hired hand.
Ownership is a topic for another day, but they must be acquiring an ownership share in part of the family business.
Phase 4: Advanced Management & Ownership
Phase 3 was “beginning” management and ownership, Phase 4 extends into more and more complex segments of the business. By this time, it must include the finances. I’ve seen many families get to Phase 3, but can’t bring themselves to turn over the checkbook.
Do your family meetings and discussions include every financial aspect of the business? Do you include your son or daughter in discussions with landlords, loan officers and key vendors. They need to be developing those skill sets and relationships. Limiting too much control in only one person can lead to devastating consequences when an unexpected accident or illness occurs.
Phase 5: Become the Majority
In the final phase the next generation becomes the majority manager of the operation. This does not mean tossing them the keys and walking away. It often does not even mean retirement. The senior generation is still vital to the operation and can stay involved, but it does mean our roles change. Their focus becomes coaching and less and less calling the shots.
For more tips on the five phases of succession planning, visit https://extension.missouri.edu/publications/g516
Wesley Tucker is a Farm & Ranch Transition Specialist with the University of Missouri Extension and a cattle producer in the Ozarks. He has 23 years of experience assisting agricultural producers throughout the U.S. As a transition specialist, his passion is training and assisting families through complicated family dynamics so the farm or ranch can be a thriving business for future generations and the family can remain a family.
