CAMBRIDGE, Ont. — Good communication and planning are lynchpins to successful farm family businesses, especially when it comes time to move the assets from one generation to the next.
However, both receive far too little attention, says John Fast of Family Business Solutions in Waterloo, Ont.
“About 70 percent of the North American economy is based on the activity of family businesses,” Fast told the Ontario Potato Board’s annual meeting Dec. 3.
“But only 30 percent of family businesses make it to the second generation. Only 15 percent make it to the third and just five percent to the fourth.”
Read Also
Farming Smarter receives financial boost from Alberta government for potato research
Farming Smarter near Lethbridge got a boost to its research equipment, thanks to the Alberta government’s increase in funding for research associations.
Fast said dealing with the legal and financial issues is relatively easy. The true challenge is to maintain healthy relationships.
He said family members need to feel loved and appreciated.
“That’s the No. 1 problem in family businesses — the lack of affirmation — especially for the kids.”
Fast talked about his experiences in farm family counselling to show how things can go right and how they can go wrong.
One example was a family with multiple siblings who discussed and planned the succession well in advance. The parents were prepared to give up control.
“As the father said, ‘I’d rather gift my children with a warm hand than a cold one,’ ” Fast said.
“The children knew what was more important was the passing on of values and love.”
Everyone signed off without a fuss, and then the father asked permission from the new owners to buy a new pick-up truck. He had truly let go.
Another example was also a family with multiple siblings, except in this case the father died from cancer. Succession plans had not been discussed beforehand, and each of the four siblings — three daughters with careers and a son who stayed on the farm — interpreted the will differently.
“That family has not had Christmas together for 13 years,” Fast said.
He said it’s also important for young people growing up in a family business to have a sense of ownership.
That might be provided within the family business, but a better idea may be to temporarily sever the ties. He advised setting the children loose in the world for three to five years so they can build skills and confidence on their own.
It’s not a good idea to keep the children tied to the business but never allow them the freedom to make decisions and the occasional mistake, he added. That’s a scenario that could lead to disaster.
“Statistics show this,” he said. “Children involved in a family business are 10 times more likely to fall into some type of addictive behaviour.”
Fast said it’s not good enough to think that you understand what other family members are thinking and feeling because there can be assumptions that have never been dispelled, grudges held and conflicts that have never been resolved.
He recalled attempting to sort through a conflict at a dairy farm concerning a wedding invitation that had occurred years previously. The farm was split down the middle when it came time to pass the operation on to two siblings rather than being maintained as a single, more economically viable unit.
“Have a huge whack of forgiveness on hand because we’re all human and we all make mistakes.”
He said facts are sometimes irrelevant. It can sometimes be better to understand the underlying feelings to best gauge a situation.
