When you ask good questions, sometimes you understand the issues better. Am I ready for a farm business transition? When is the best time to start? How do I know when I’m ready to start?
There is a lot to think about as you consider a farm business transition. At the heart of the process is your goals and dreams for the business, your family and yourself. There are lots of great questions you need to answer to be ready for success. Here are a few:
- Is the farm, in its current format, generating enough income to support an additional family?
- If not, are there farm income expansion possibilities or viable off-farm income possibilities available to support the entering family?
- Is there a way to transfer the farm and keep everyone in the family happy? This includes exiting and entering families as well as non-farm heirs and in-laws.
- Can the parents afford to give some financial assistance to the entering family while still maintaining an adequate retirement income?
- Is the exiting manager willing to transition management skills and management decisions to the entering manager? Do you like the idea of teaching the new folks “How we do it here”?
- Have the parties involved in the transition had a positive, respectful and considerate attitude toward one another in the years before entering a transfer agreement?
- Does the entering manager have the ability, desire and willingness to learn the farm management skills needed to manage a high-risk, low-margin, highly competitive business?
- Can the involved parties communicate openly and freely with one another?
- Are all parties involved willing to develop a written plan of transition and a business agreement prior to starting the transition process?
- Are housing facilities available which will provide acceptable, yet independent lives for each family involved?
- Are all participants, including spouses, willing to be involved in decision making regarding work tasks, hours, vacation, finances, and family expectations?
- Are all parties willing to start with a trial period of working together, through a wage agreement or farming independently while sharing resources, for a year or two before starting a formal arrangement?
If you can answer “Yes” to these questions, you should look for my next blog and a few more questions. If you answered “No” to any question, you may wish to evaluate the situation before you proceed.
In some cases, you will need the help of trusted advisors to answer these questions. It’s another reminder of the value of fee-only, fiduciary financial planning advice during this process.
If this article has you thinking about your own circumstances, contact my office at firstname.lastname@example.org. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.