Editor's note: The following article appeared in the August issue of Dairy Herd Management.
When you read about the "next generation" and "transition" in a dairy herd health column, you naturally expect to read about calves and cows. However, I am veering from the animal health topic this month to discuss generational transfers leading to a healthy future for family dairy farms.
In my role as a veterinarian, I am privileged to be working with the fourth and fifth generations on some farms. The next generation seems to have a renewed interest in returning to the family farm.
However, it appears passing the family farm to the next generation is getting more difficult. Land prices, the recent boom in agriculture, and aging farmers with fewer direct descendants all add to the challenge. The culture to keep land in farming is strong, but as land values increase, so does the competition between farming and encroaching urban development.
Define, communicate and implement a plan
These pressures increase the importance to plan for a generational transfer. While most families intend to transfer the farm to the next generation, only 34% actually create a successful succession plan. Only 30% of farms are successfully passed to the second generation; 15% to the third generation; and only 1% to a fourth generation.
There are three main areas to look at when thinking about the transfer of the family farm.
1) You need a clearly defined plan.
2) The plan must be clearly communicated.
3) The plan must be simple enough and clear enough that it can be implemented.
The entire process could take more than 10 years, and beginning the process is often the toughest part. The Ohio State University-Extension website has a series of fact sheets to help you get started. Visit http://ohioline.osu.edu/bst-fact/index.html.
Developing a plan is a challenge, and usually the reason the process never begins. A clearly defined, written plan is not an easy task, and will often require the help of a team of professionals. We recently hosted a producer meeting on this topic. A suggested team might be a facilitator, banker, veterinarian, insurance agent, attorney and other interested parties.
The plan must include clearly defined intentions, successful methods of making these intentions happen, and a transfer timeline. Regular family business meetings are a must. Keep good written notes, and be sure to listen to each other. Allow enough time to get it right: a year or two is not too long to develop a good written plan.
Communicating the plan is essential, often requiring open dialogue for one or two years. The communication must be with those involved in the farm, as well as off-farm heirs and in-laws. Parties who feel left out will create challenges to the process. More generational transfers fail due to poor family relationships than any other reason.
Plan implementation, after it is communicated, is not as easy as it sounds. Even the best-laid plans require changes in ownership and management. It is not easy to step away from a role you have held for decades and turn it over to the younger generation.
Trust me: I am in the same boat. Generational differences are huge. Millennials do not do things the same way as Baby Boomers. Letting go is inevitable, but it is a process, taking time, patience and fortitude. Trust in the next generation is essential.
I am working with the fourth and fifth generations of dairy farm families who have successfully completed transfers. Unfortunately, I have witnessed numerous transfer failures and have experienced the tragic breakups of families over an unsuccessful plan or failed communication.
With successful planning, communication and implementation, the future of the family dairy farm is promising.