Communication key to passing on family farm

Statistics show that the vast majority of farms are family owned and operated.

Farms are increasingly incorporated entities, but the role of family has remained central. Family businesses have inherent strengths that we like to celebrate, but we should also recognize the problems.

Families don’t typically air dirty laundry in public, but if you look around communities, you’ll often see instances where siblings or cousins or parents and a child used to farm together but don’t anymore. Sometimes the breakup was amicable. In other cases, there was probably some short-term or long-term acrimony leading up to the decision to run separate operations.

Family farms can become dysfunctional, particularly when more than one family is involved. A young man with a degree in agriculture and a good job told me that he often thought about returning to the family farm, but his father and uncle had long farmed together and the arrangement was a mess.

Not only did the father and uncle not really get along anymore, but the business relationship had become confused over who owned what. Until or unless the mess could be addressed, this young man couldn’t see himself being involved.

Succession is a huge issue, and while some farm families develop a clear plan, many do not. Instead, the farm lurches forward based on ad hoc decisions.

The problem often boils down to communication and personalities.

How many families hold succession meetings with all the children, including the non-farming ones? Many don’t because they fear conflict. A formal discussion might fuel the animosity that has long been bubbling under the surface.

And sometimes we can’t come to grips with our own feelings.

The older generation may have a tough time giving up control. Dad feels that he has built this empire, and while his stated goal might be to pass it along to the next generation, it’s hard to step aside from your life’s work.

The farm becomes part of your identity. While many people have no trouble imagining other things they’d like to be doing, others can’t envision a life without the farm at the centre of their existence. Surrendering control means facing your own mortality.

For their part, the younger generation can be indecisive. They like the farm, but also have other interests. Or maybe they like the farm, but their partner isn’t sure. Or maybe they just aren’t cut out to make management decisions.

Farm asset values have increased rapidly, particularly the value of farmland. For many operations, profitability has been strong. Farm succession should be easier than ever.

But how big will the farm need to be to remain viable in the years ahead? How much equity should the retiring generation take with them? How much debt can the incoming generation afford, particularly if they want to continue expanding?

There are other ownership and management models, but families will continue to be the driving force behind most farms for the foreseeable future. Family farms have a resilience and work ethic that’s hard to match. The downfall can be communication and long-term planning.

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