4 Vital Succession Planning Steps 

If you want to see your farm succeed in the next generation, make sure you have the right plans in place, and set them up sooner than later. You can face huge costs if you don’t structure them correctly, according to Paul Neiffer, CPA  and principal with CLA, and Rena Striegel, owner of Transition Point Business Advisors. They suggest farmers take these four steps.

1. CONSIDER THE FINANCIAL SIDE OF THE BUSINESS. 
Farmers can relieve much of the stress they encounter by having real-time data at their fingertips to monitor their progress and results, Neiffer says. That sounds obvious, but too many farmers are still unable to do that. Accrual financial statements can help you know your costs and monitor your actual costs against a budget, so you can adjust accordingly, he says.  If you don’t understand how to implement accrual accounting practices, you’re not alone. Reach out to a farm CPA in your area or online and learn how to put them into practice. 

2. START THE PROCESS WHILE THE NEXT GENERATION IS STILL YOUNG. 
“The farms that have done succession the best start when the kids are learning the tough stuff— how to pick up rocks and pull weeds,” Striegel says. “You’re stamping out entitlement at a very young age.”  In the process, Striegel says, you are teaching the next generation about the psychological ownership of a farm.  “They learn the farm is theirs to care for and not that it’s theirs to simply benefit and draw a paycheck from,” Striegel says. “The next generation needs to understand the people and everything around that operation —from the family relationships, employees, livestock and crops.”

 3. TRANSFER RESPONSIBILITY AND ACCOUNTABILITY. 
Often, the older generation has a difficult time delegating jobs and tasks to the younger generation. But delegate you must for the next generation to be equipped for succession when the time comes to formally transition the farm. Start with small steps and build upon them, Striegel advises: “Set expectations and know what you’re going to do when they aren’t accountable. If you can get that level of openness in your conversations when your kids are younger, by the time you get to a transition conversation or a succession discussion, it is so much easier, because you’re used to talking to each other.”

 4. UNDERSTAND A SUCCESSION PLAN IS NOT LINEAR. 
Anticipate there will be changes on the road to succession for your farm, so adopt an attitude of flexibility, Striegel says. With a plan in place, you have a tool that you can modify to fit what your family and farm need overtime. “Having a plan in place can help alleviate stress, even if things change,” Neiffer says. “Keep in mind farming is a dynamic business, and your plan needs to be, too.”

To access resources and tools to help guide your succession planning journey, visit FarmJournalLegacyProject.com 

Learn more about The DIRTT Project.

Article by Rhonda Brooks, Farm Journal