Woodbury-Farm Family Business 12/02 11:14
Taking Over the Family Business Requires Education and Drive
Succession is more than just handing over the business. It's also about
passing on resolve to manage through lean years.
By Lance Woodbury
DTN Farm Business Adviser
Editor's Note: Lance Woodbury writes for both DTN and our sister
publication, "The Progressive Farmer." He is a Garden City, Kan., author,
consultant and professional mediator specializing in agriculture and
closely-held businesses. He also is a featured speaker at a pre-Ag Summit DTN
University workshop Dec. 7 in Chicago. For details go to
http://www.dtnagsummit.com/ or http://goo.gl/1nwp7f. To pose questions for this
column email email@example.com
I have heard the concern over and over again: The older generation is
preparing to transfer responsibilities for the farm, but the parents don't see
the same determination in their children that they felt 30 or 40 years ago,
when taking over or starting the business. In fact, the younger generation may
have returned to the farm during some of the best years of American agriculture.
While children may have been very young during the lean years, they don't
see and understand the struggles that went into building a farming enterprise
in the 1980s and '90s. The parent often feels powerless to transfer--along with
the title to the farm -- this "hunger" that they felt in their youth. How will
their children have the same perseverance, toughness, insight and dedication to
the task, when they never really tasted some of the hardships?
Someone said, "Good judgment comes from experience, and experience comes
from bad judgment." If you are concerned about whether the next generation has
the judgment, skills and hunger to survive some tough experiences, affirmative
answers to the following three questions should allay many of your fears.
1. Do they understand finances? In any business, and especially in our
capital-intense industry that's highly dependent on uncertain variables such as
weather and commodity markets, financially significant decisions must often be
made quickly. Family members who understand the income statement, balance sheet
and the impact of their decisions on key financial ratios will be better
prepared to stay out of trouble.
I know several family businesses that encourage college-bound members to
study business, finance or accounting. Their goal is to equip the next
generation with skills that will serve them well in any enterprise, including
agriculture. Several of my clients have monthly or quarterly meetings with
their accountant or lender to review financials as a group. Those advisers
spend every day assessing how decisions relate to numbers, and can be an
educational resource to the family business.
2. Can they adapt? When we think about what it takes to succeed in business,
we often think of discrete knowledge or skill sets like finance, negotiation,
supervision, agronomy and animal husbandry. Certainly such technical knowledge
is important. However, Claudio Fernandez-Araoz, writing in the June 2014 issue
of "The Harvard Business Review," points out that in a volatile world, the more
important skill is adaptability: Does one have the potential to adapt to a
changing business environment? He points out there are plenty of smart people
who had the right skill set on paper, but who failed in leading a business
through change. He goes on to articulate five indicators of one's potential to
adapt: The right motivation, curiosity, insight, engagement and determination.
Consider how your next generation stacks up to those criteria in other areas of
3. Do they own decisions? When major financial decisions are being made,
what role does the younger generation have in those deliberations? Are they
helping to decide when to market grain or livestock? Are they involved in the
analysis of your equipment program? Are they at the table when deciding to rent
or buy more ground, or purchasing inputs? Do they participate in your tax
planning? Those are some of the decisions that contribute to financial
stewardship. Involving them in the homework and decision itself not only
educates them, but contributes to psychological ownership of the business.
These areas are not exclusive indicators. However, if the next generation
understands finances, is able to adapt to change, and owns a share of the
decisions about the future, then you are on a good path to transferring the
hunger or determination that will lead to family business continuity.
Copyright 2014 DTN/The Progressive Farmer. All rights reserved.
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