Communication, goal-setting crucial to passing on farm business
GRAND FORKS, N.D. — Though it’s tempting to put off planning for farm business transition, there’s too much at risk to delay, according to a North Dakota State University professor.
“Let’s not procrastinate. Let’s get engaged in this planning,” said David Saxowsky, a professor in the NDSU agribusiness and applied economics department.
Saxowsky gave the Feb. 20 keynote address at the annual International Crop Expo at the Alerus Center in Grand Forks, N.D. The show, which combines activities sponsored by small grains, potato and soybean groups, was expected to draw 5,000 people and about 175 exhibitors.
Many area farmers are in their 50s and 60s, so passing on the farm or farm business to new owners is an important consideration in agriculture. More than half of North Dakota farmers and ranchers, however, don’t have a transition plan in place, according to information presented Feb. 20.
Failing to plan means, at best, failing to make the most of what the family business already has accomplished. At worst, it could cause the farm to go out of business, Saxowsky said.
He said successful transition planning involves developing answers to three main questions:
Where are we today?
Where do we want to go and when do we want to arrive there?
How do we want to get there? What path are we going to follow?
In coming up with answers, farm business owners and potential owners need to be honest with themselves and family members. Though bringing in a third party for an outside perspective can be useful, there’s no substitute for honest self evaluation, he said.
For instance, both current and potential owners need to decide if the potential owners have the skills necessary to run the business successfully.
Setting goals and prioritizing them is vital, too, Saxowsky said.
Ownership of a business and ownership of assets often are different things. For instance, a farmer might own a farm business, but not some of the land he farms. Ownership of the two might transfer at the same time, or different times.
Compromise might be necessary. “Negotiation means everyone gives a little. No one gets everything they want.”
Distinguish between “equitable” distribution and “equal” distribution of assets. Focus on the former, not the latter.
Once a transition plan is developed, implementing it will take perhaps three to five years.
“Don’t overlook the value of using that time to help the parties to adjust to their new roles.”
After Saxowsky’s presentation, Grand Forks County farmers Chuck Nelson, Robert Drees and Jared Hagert talked about their own experiences with transition planning.
Nelson talked about the importance of getting started.
“Failing to plan is planning to fail,” he said.
“People involved in a farm business transition should use the services of an ag banker, tax accountant and tax lawyer, preferably one who understands agriculture,” he said.
Drees talked about the role of buy-sell agreements, or contracts for the purchase and sale of a business interest.
Hagert talked about the emotional aspects of transitioning a farm business to the next generation.