“Agriculture is the most healthful, most useful, and most noble employment of man.” -George Washington
Ask any farmer about their operation and its history, and their passion and zest for the chosen profession will quickly become evident. Working hard from sunrise to sunset and having a tangible product to harvest at the end of a season is truly a ‘way of life’.
Whether it’s a farm that has been in the family for centuries, or a first generation family farm, there will always be a strong desire to preserve and protect the legacy for generations to follow.
“Remember, tomorrow is promised to no one.” -Walter Payton
Transitioning from one generation to the next has always been a challenge. If the family farm or business waits for a crisis to force a change, the changes might not be optimal and can be catastrophic to the business. Succession planning creates control over something which will inevitably change.
More than 30 percent of all family-owned businesses make the transition to the second generation. 12 percent will be viable into the third, with only three percent operating at the fourth and beyond.1 If we have learned anything from the pandemic, it is how circumstances can rapidly change in ways that are beyond our control. Having a succession plan in place that involves transferring knowledge, control, and ownership between the current owners to the next is essential for the future viability of the business.
It is estimated that business owners need at least 10 years to plan for succession.2 Transparency and communication with all involved parties is key throughout every stage. For example, transparency of financial statements to ensure the business is viable enough to pass on and communication with each person to ensure understanding and clarity are all good practices.
Often times ‘pulling back the curtain’ and involving family members into these stages of planning can be difficult. Seeking unbiased opinions from financial and industry professionals can help advance these stages of planning.
“Don’t leave anything to chance; even change.” -Sissy Gavrilaki
Succession planning should not be left to chance. Having a plan in place well in advance of when it is needed, and constantly reviewing/updating the plan, will help prepare your farming operation for the inevitable change on the horizon.
To learn more about farm family succession planning, request our recent webinar materials and replay with PA Farm Link and AgChoice Farm Credit at mafc.com/webinar. Give us a call at 888.339.3334 with any financing needs or questions you have about your farm today.
This article was written by Farm Credit Loan Officer, Geoff Delamater, located in our Bel Air office.