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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 lance@lancewoodbury.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 
their lives.

   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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