Generational farm transfer, step 1: What do you want?

A friend called recently to share a sad story about his family’s current farm situation. The details aren’t mine to share but to say it includes heartbreak, courts and frustration would be accurate. He’s not the first person I’ve heard something similar from, and I doubt he’ll be the last. 

I hear a lot of discussions about inter-generational transfer of farms. This makes me happy because we have to talk about it. We have to share advice and knowledge on an industry level, and we have to have these conversations privately between partners on farms. 

Family dynamics have a huge impact on how businesses run and operate. In my experience nothing can inflame huge emotions quite like the topic of generational transitions. 

If you’ve listened to a video, podcast or speaker talk about generational transfer and where the biggest issues lay, communication is one big, bold word that comes up a lot. I don’t disagree, but have always thought the first step toward improved communication is often missing from these lessons. 

The first step isn’t to sit down and start a big discussion with the family partners or a group of consultants. In an ideal situation — where all of the parties are open and willing to take this journey — the discussion starts with yourself. You need to know what you ideally want, where you are willing to compromise, whether you are in a healthy state of mind for these conversations, and whether you’re willing to embrace the team that needs to be a part of the process. 

Even if you don’t think you are in a healthy state of mind, you should still do this self discussion. I’ve always found if I start rolling the idea around in my head for a bit, it makes it easier to start discussing the idea on the outside. 

I’m also a big fan of writing out the answers to questions that can help you form your thoughts. Answer the first round as if money and time and health are no object — so answer them as ridiculously as possible. 

For the generation moving out of the business or wanting to take over ownership in the future:

1. How long do you want to keep working full-time? Part time? Consultant? Emergency help? Not be involved?
2. If money, time and health weren’t issues, what would you like to do in retirement? 
3. What do you want the farm to look like in five years — even if you aren’t involved? …10 years? …15 years? 
4. How do you envision the transfer happening? 
5. How much money do you need to live this retirement? 
6. What are you willing to compromise on?
7. How often do you want to go on vacation? What do those look like? 
8. What do you want and need your housing situation to look like?
9. How do you want the business to continue to grow, for yourself or future generations?
10. What sort of hobbies do you have and want to continue?

Answer those questions with your wildest wishes, then answer them again, only more realistically: lofty but still attainable. 

(One huge caveat to remember throughout this entire process is that a generational transfer usually takes compromise. Most farmers agree they want to see the farm continue with a successful next generation.)

Once you finish your second round of answers, establish where you’re willing to compromise. Of course you have needs and wants and wishes, but some unrealistic plans may have to change.

Obviously you need a sound understanding of your finances for this. If you don’t, I’ll remind you: If you don’t know how much money your farm makes, you simply can’t do this process well. It’s just not realistic, so know your finances!

If you’ve made it this far, congratulations: You’ve finished step one and prepared yourself for this difficult discussion.

Now, if you realize you aren’t in a healthy spot, or have no plans of relinquishing control, you need to just stop everything right now. You have an ethical duty to inform your partners that you have zero plans to start a generational transfer. If family members are there expecting to be handed the reins in the future, you have a responsibility to inform them that it isn’t in your plans. That might make for heartbreak now, but in the long term you are saving a lot more. 

The worst stories are those in which someone hung around a farm for decades, expecting to be included in the future, only to eventually learn they’re not part of the plan moving forward. 

Or a sibling changes their mind once they’re no longer working in a partnership with the other brother or sister. 

I’ve even seen the next generation invest hundreds of thousands of dollars in a dairy facility only to eventually be told the cows were being sold. Nothing says more family drama quite like that, so don’t be that partner!

The first step to figuring out your farm’s generational transfer is to decide what you want. It’s not to jump in and have a talk. Knowing what you want and what your goals are for the farm — and for yourself — means you have a platform to work from. 

Nothing about this process is comfortable or easy, but it’s necessary if you want your farm’s legacy to endure beyond your own years. 

Dairy farmer Ashley Messing-Kennedy is president of the Huron County Farm Bureau.