Financial issues must be addressed from the outset with the leadership knowing whether the operation is on solid footing and efficient. Without knowing that, it is not possible to know how many families the operation can support. Financial feasibility is key to success, and every operation must be able to financially survive death, disability, and divorce of the key managers.
A resource inventory is also a necessity to help the management know if the transition can work. Those include real estate, improvements, equipment, human resources, and community services with a focus on whether they all are working together. The senior generation may hold all of the assets, but that means the business may not survive upon their passing.
Identify the strengths, weaknesses, opportunities, and threats for the operation. Find out what can be done better than others, what you should avoid, what advantages are available, and what obstacles may be in the path to success.
Create major financial reports for the operation, including commodity production budgets, cash flows, balance sheets, sample income statements and others to determine where issues need to be addressed. Seek assistance from experts in their evaluation. Determine where you are on the gauge, where you want to be and how you can get there.
Create a business plan for the operation that will show expansion and planning with succession from one generation to the next. This will communicate your operation to lenders and demonstrate your stability over time.
Estate planning is a must in any farm succession plan, but not just for the retiring generation. It is a requirement for all generations because those plans must include funding provisions and decisions about asset allocation. Those also include the legal structure of the operation and the comfort of knowing heirs will not be fighting over the estate.
The plan must be put into action with a timeline and points at which goals will be achieved. Transitions will happen, whether desired or not, and a good implementation plan will assure everyone that the succession plan is being managed, instead of being out of control, and unable to allow new generations to join the organization.
Farm succession planning can be a successful venture but it takes good communication among all involved and common goals. Consultants can assist in the development of a plan, but the family members must have all of their family desires known to everyone before valuable resources are spent on consultants.
Source: FarmGate blog