I was just a mile from my house driving my 15-year-old son to soccer practice. At a stop, we noticed what looked like a person lying in the railroad tracks a few hundred yards away.
I immediately turned my truck onto the track. When we got within 50 feet of what we could definitely see was a person, a train came around a curve less than a half-mile down the line.
Later my wife asked “What were you thinking?!” I knew a train was a possibility. But I was consumed by the immediate problem and ignored the obvious.
You are busy every day managing and mitigating the risks of being in the dairy business. You mitigate price risk and interest rate risk, hedge feed and input costs, consult with CPAs to manage tax risks, work with veterinarians and nutritionists to manage herd health, etc.
But what are your trains? What are the events that would immediately alter every other plan you have made?
In my 20-plus years of banking, these are the trains that I’ve seen cause the most damage:
Premature Death or Disability
Without a plan, premature death or disability can be devastating for the family and the business. Having a buy/sell agreement might not be enough. You might need to have a plan to fund the agreement, too. There are several ways, such as life and disability insurance and/or asset sales, to mitigate this risk.
Lack of or Poor Succession Planning
When I’m meeting a prospective new client, I’ll always ask some version of “Why did you decide to be a farmer?” When I hear “Well, my family has always…”, I want to lay down my pen and remote start my truck.
This is not to say that successful multi-generation operations aren’t possible, but sharing a last name isn’t the only qualification needed to run and own a successful farm.
If you hope to someday own the farm, what are you doing to demonstrate your ability and desire to do so? Are you being intentional about acquiring the appropriate experience to successfully lead an organization?
If you own a farm, do you have the right successor(s) identified? What are you doing to help prepare them for the future? Do you both have clearly stated goals and timelines? If you don’t have a plan, you might see your former assets added to the neighbor’s balance sheet.
The engineer saw my truck in the tracks and hit the brakes. I could get my truck off the tracks in time. And the train stopped right where the man lying in the tracks could crawl away shaken up, a bit banged up, but alive.
It can be uncomfortable discussing plans for succession, unexpected death or an accident, but the same business partners and family members who help you mitigate the day-to-day risks generally have the ideas, experience and willingness to help build a plan.
Be prepared. A train might come down the tracks.
Dan Villwock, managing director, Rabo AgriFinance. Based in Michigan, Dan oversees the lending team for Rabo AgriFinance’s business from Michigan and Indiana in the west to upstate New York.
