A strong farm succession plan begins with a discussion about feelings rather than numbers, says a family business consultant.
“That’s not where you start,” said John Fast, who spoke at a recent Farm Credit Canada forum in Saskatoon.
“Not if you plan to have a happy family left at the end of the day.”
Taxes, accounting and shareholder agreements are certainly part of the package, but that’s actually “the easy stuff,” he said.
It’s more difficult for families to have open and frank conversations about their expectations, needs and desires, he added.
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“At the end of the day, the success of your family farm, if you truly want to manage it into an intergenerational transfer, will be less about the facts, the numbers, the acreage,” said Fast, who is president of Family Enterprise Solutions and a motivational speaker to business owners.
“It will be all about the feelings.”
In his 15 years as a consultant, he has found that only a minority of the families and business owners he has spoken to have a succession plan in place. He called it a grim situation, particularly since the large baby boomer population is nearing retirement age. Agribusinesses aren’t immune.
FCC’s data agrees. The organization says that $50 billion in farm capital will have changed hands between 2003 and 2013.
Fast said difficult questions must be confronted to create harmony in the family and help buck the trend of businesses failing in successive generations.
He said succession plans fail because family members muddle interests related to family, business and ownership.
“Those are three very different bottom lines,” he said, noting that a good business decision may conflict with the interests of a parent.
He said families need to be honest about whether they’re ready to pass over control and if the younger generation is capable and even interested in receiving that responsibility.
“The definition of becoming an adult really is to establish some psychological distance (from) your family of origin,” he said.
Families need to reach agreements not between parents and children but between partners. A successful conversation may find that succession isn’t an option.
“Ultimately, succession is all about you doing business. Do you do business deals with children?” he said.
“You start with your next generation, you parent them … but finally you really want to be a business partner.”
