Contact Us to learn more about our services.
5 Key Steps to Successful Farm Transition
Tips for successfully handing your farm over to next generation
by Chelsea Johnson
Transitioning your family farming operation to the next generation of owners can feel overwhelming at times. You may be considering questions like: Where do I start? Do I need a lawyer involved? How do I make sure the farm stays successful through the transition?
“At least one in five farmers don’t have a clue what will happen to their farm if they die or have to stop farming.” – AgCompass’s Planning for Farm Succession
Luckily, transitioning your farm doesn’t need to be a stressful or confusing process. By following five key steps, you’ll be able to transition your operation smoothly, ensuring its future success for the next generation.
1. Identify everyone who will be involved in the succession process: The first step is to identify everyone involved in the transition: current and future owners, staff, family members, or others who are involved in your business.
2. Start the conversation today: Once you have identified those individuals, begin discussing your goals, their goals, and the state of the operation. Having open communication and realistic goals is essential for the success of this step.
Have these conversations as early as you can. These conversations may identify areas where involved parties don’t agree: you need to make sure you have enough time for everyone to be heard and to reach compromises. Better to have uncomfortable conversations now than risk the viability of your farm later.
Important questions everyone should answer and share include:
● What do I want to happen in the succession?
● What do I fear may happen during succession?
● How involved do I expect the current owners to be after handing over the reins?
During these conversations, you will also need to honestly discuss the farm operation. Important topics to bring up include:
● Transparent financial information about the farm
● The farm’s unique strengths and weaknesses
● The farm’s resources and debts
A key goal for these conversations is to identify shared goals with all the participants. These goals will inform how and when you start your transition.
3. Legal nuts and bolts: Now that you have discussed goals, hopes, fears, and gotten everyone on the same page, it’s time to review relevant laws, regulations, and taxes that may affect your transition. If your operation is complex with multiple stakeholders, this step can be complicated. Consider seeking out experienced professionals for guidance. Experts are also available who can consult on business structure, investment opportunities, and more. Good advice and guidance from professionals should be budgeted for now to avoid costly issues later.
4. Create a succession plan: Now that you have gathered all the relevant legal information and identified stakeholders’ goals, it’s time to create your plan. There are many templates for the document available online and through local agriculture extension agents. Find one that best fits your needs and complete it. Share the plan with all the stakeholders and amend it as necessary.
A succession plan is a living document. The plan should be reviewed annually and amended as circumstances or goals change.
5. Keep your technology and records up to date: Before, during, and after the succession process, it is key to make sure you have accurate and accessible records about your farm. Secure, cloud-based records will help future owners make smart decisions, make it easier for an advisor to evaluate your operation, and protect your farm from unexpected disasters.
A SaaS company like AgCompass that specializes in hosting accounting software and data is the most secure way to keep your records safe and accessible. Learn more about AgCompass.
More resources from AgCompass: