Farm succession isn’t always a simple handoff

As an outsider in Canadian agriculture, Robert Andjelic has views that diverge from the mainstream.

What’s become clear to Andjelic is that automatically passing the family farm to the next generation doesn’t make sense.

In fact, the tradition could stifle innovation and progress in Canada’s agriculture sector because kids are often ambivalent about the family business.

“I’ve (seen) a lot of young sons and daughters take over the family operation. A very small percentage, five to 10 percent, could take (the business) to the next level…. My point being: farming is no different.”

For decades, Andjelic witnessed many sons and daughters take over a family business in Manitoba. In the 1980s, 1990s and 2000s he owned millions of sq. feet of commercial real estate and developed relationships with hundreds of business owners. Some controlled multimillion-dollar companies and others ran small “ma and pa” operations.

After years of watching and learning, Andjelic developed a rule to describe the business transfer from one generation to the next: the three- to five-year rule.

“Invariably, they (the younger generation) would last three to five years. If they went past that, they would do OK,” he said. “Sixty percent didn’t make it…. Ten to 20 percent would make it and struggle with the business for maybe another 10 years.”

Andjelic, who sold his commercial real estate business in 2007, now runs Andjelic Land and owns 210,000 acres of farmland in Saskatchewan.

Despite his short stint in the ag industry, he’s convinced that family farms are the same as other family businesses.

If the next generation isn’t committed to the farm, they shouldn’t assume control of it.

“They have no business taking over the family business … (if) this is just a toy to keep dad happy after retirement,” Andjelic said.

“I know the results from my past. Their heart and soul and mind have to be in it.”

The idea that a son or daughter should not take over the family farm is close to blasphemy in Western Canada.

Many families take great pride that their farm is a fourth or fifth generation operation. In many cases, Dad’s primary goal is to improve the farm so it’s ready for the next generation.

However, statistics and studies support Andjelic’s position.

The New York Times has reported that only 30 percent of family-owned firms make it through the second generation. That is, 30 percent keep the business going and pass it on to a third generation.

The reasons for failures are complex. Perhaps the older generation is reluctant to give up power. There’s also the issue of having a professional business relationship with blood relatives.

Andjelic believes the “second generation curse” also applies to farming.

Others aren’t as sure.

There are no studies looking at the financial performance of Canadian farms, based on how those farms were acquired, said J.P. Gervais, chief economist with Farm Credit Canada.

“In my line of work, I cannot establish a correlation between things going well with a transition, based off whether it’s family or an arms-length (transition).”

However, anecdotal evidence suggests that family succession may be working quite well within Canadian agriculture.

“Yes, there are instances in which things are not going to go well … and instances where things are going to go great,” Gervais said.

Nonetheless, Andjelic believes that children should follow their own dreams and not their parents’ dreams.

Agriculture must attract people fully committed to farming and financial tools are needed to get those people on the land.

Gervais said some of those tools already exist.

Business models and financial arrangements in farming have changed over the last two decades.

“Yes, there are a lot of farms that are transitioning, the old-fashioned way…. But there are also a lot of other things going on.”

Renting land, joint ventures and partnerships are now more common and such options are opening up agriculture to more people.

“If you look at net entry of young producers, it’s been positive,” Gervais said. “We’ve been reversing the trend of having fewer and fewer young entrants.”

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