Without a doubt, one of the most transformative times for any family is the growth of the family tree. At its best, it’s a time for celebration by adding a new daughter or son, step-parent or sibling. At its worst, it’s a time of upheaval and mistrust that leaves the family in shambles.
Now, overlay the complexity and uncertainty of any modern family farming operation and the stakes are high, not just for the family but also for the business.
With the 2016 Census of Agriculture reporting the average age of Canadian farmers at 55 years, the demographics are ripe for the next generation — and their partners — to be heavily integrated in the farm and starting to think succession planning. Yet the same Census of Agriculture indicated that only 8.4 percent of Canadian farms have a written succession plan.
It’s easy to see why. The day to day, in-field, decisions are consuming and the annual “in season” preparation is more complex than ever with year-round marketing, maintenance, financial planning, acquisitions, training, input storage and so on required to stay competitive. What’s potentially missing is the medium- and longer-term strategic planning.
Furthermore, the old adage of shirt sleeves to shirt sleeves in three family generations may be a bit overly dramatic but it has merit. Data support the saying with only about 30 percent of family businesses making it to the second generation and 10 to 15 percent to the third generation and less than five percent beyond that. Keep in mind that many of the aforementioned 55-year-old farmers are the second or third generation.
And for many aging farmers, there is a lot to lose. Land values have appreciated by orders of magnitude in recent decades, making for robust balance sheets. Profitability and cash flow are much more variable, however, yielding an asset rich, cash poor scenario in some cases that requires getting the most out of land liquidation, even when the kids are involved.
These trends suggest that we may be poised for a big change in the continuity of family farms. Granted, many acres from failed successions will be sold and incorporated into the fewer, larger farms that do succeed, but without sufficient family planning and consultation, everyone is at risk of missed opportunity.
So, what of the new family members entering the family and the farm? It can be an isolating role that gives the newcomers all of the exposure of the business but little voice. They are welcomed to the family but not necessarily the business.
We know that farming is one of the most dangerous occupations but we are just beginning to understand the mental health implications of the industry. Spouses are particularly susceptible, given contending obligations of home and children, off-farm occupations and adjusting to a new family.
The issues and opportunities of family farm continuity planning are complex and take time to formulate. The emotional barriers of founders relinquishing power and imminent mortality are hard to broach but do not get easier if prolonged or neglected. Subsequent generations and isolated family members can feel all the pressures of the business but not be involved with business strategy or succession planning. Their ideas and intentions might be the difference between family and business harmony or failed continuity. The time to formulate a strategy is not when the strategy is needed.
There is no simple five-step plan for successful continuity, and each family and business is unique. Families might start by asking “what do we hope for in the future?” or “what do we hope to avoid?”
Begin conversations. Outline intentions and timelines. Seek support from other families, associations, accountants, lawyers, therapists and advisers. Start slowly but start now to build trust and nurture competency — in the family and the business.
Tyler Case is a faculty member at the Edwards School of Business with a focus on family business and a Saskatchewan farmer.
