- Get your family members involved immediately — communication and transparency are essential.
- A written contingency plan can help provide a road map for those who might have to step in if an untimely event occurs.
- Surround yourself with competent transition planning advisors.
- Explore exit options with your advisors and establish expectations for transitioning your business.
Make an action plan for the next phase of your life
The last couple of years have been an emotional rollercoaster for agribusiness owners. Labor shortages, volatile markets, higher input costs, and numerous proposed changes in income and estate tax laws have caused owners to seriously think about transitioning or exiting their agribusiness operations. For owners ready to turn thoughts into actions, here are some key focus areas to get started in the transition planning process.
Take ownership of the process and bring it into the present
Business transition success rates are not great. According to the Exit Planning Institute, only about 30% of all family-owned businesses make the transition to the second generation. Approximately 12% of these transitions will still be viable into the third generation, with only 3% of all family businesses operating at the fourth-generation level and beyond.1
During the assessment process, younger family members often express that they do not want to take over the business. Communication and transparency are essential upfront. Be sure to bring your children’s spouses and partners into the conversation, because they can also impact the outcome.
Introduce these family members to your important advisors and contacts such as vendors, financial advisors, CPAs, and attorneys. These professionals can help bridge the gap and answer questions about a potential transition.
Create a written contingency plan
You need to be ready to transition the business operations at any time due to unforeseen events. Identify which risks pose the biggest threats to your transition plan. These can be personal risks such as death, divorce, disability, distress, and disagreements, but can also include personal financial risks of market volatility, loans or debt, diversification, and long-term care.
Consider business risks as well, such as key people resigning, owner dependence, partner disagreements, and business interruption. A written contingency plan can help provide a road map for those who might have to step in to continue the operations if an untimely event occurs.
Surround yourself with competent transition planning advisors
An effective planning team works well together and is collaborative, accessible, and transparent. Your team should include a credentialed transition or exit planner, CPA, attorney, financial advisor, and sometimes even a family counselor. You and your family should be their primary focus as they work toward helping you implement the plan and monetize your transition. Once you have your team together, commit yourself to listen and be open to new ideas.
Get educated and begin to develop a plan with your team
This complex process requires accurate assessments of your business for readiness and attractiveness. The procedures involve meetings with your transition team, appraisals, business valuations, cash flow planning, personal financial planning, estate planning, and strategic business planning to improve operations. This is a good time to explore transition planning options with your advisors and establish expectations for transitioning your business.
As you put your plan into action, commit wholeheartedly to its implementation. A successful transition requires a significant amount of time and effort, so double down on discipline and fire up your tenacity. Remember to follow through with questions and stay accountable. The transition planning process may become emotional at times. Be open and transparent with your family and advisors, and navigate conflicts with education, patience, and understanding.
* Exit Planning Institute “State of Owner Readiness” 2016 survey results
How we can help
A successful family farm is built over time, with perseverance and good planning. You want to be sure it endures. Our experienced team can help you, your family, and your employees prepare for the seamless transition of your business and secure your legacy in the community.