Do you have an action plan to transfer the farm family business?
A written action plan can assist in successfully transferring the family farm business between generations.
Transitioning a family farm from one generation to the next can be assisted with a written plan of action. Because each farm family has unique needs and issues, each family business transition plan is different. This makes it impossible to develop one plan that fits all, or even most situations.
The practical approach starts with a basic understanding of the process of transitioning the authority to make management decisions. Building your understanding may include prepared resources series from the University of Minnesota. Another very good action step is attending a farm business transition meeting in your areas that extension often hosts. Group meetings are often helpful, as they allow individuals to interact with others in various stages of the business succession process. Having the opportunity to ask questions, or even better yet listen to the questions that are asked by others enables them to start addressing issues that they are finding in their plan development. Your local Michigan State University Extension office is a good first place to check to see if any meetings are scheduled in your area and to request being put on a list of interested individuals looking for information on farm transition.
One very important foundational step is building the detailed farm business inventory of assets and liabilities (balance sheet or net worth statement). A good habit to form is building an inventory on the same date each year and updating its yearly. The balance sheet provides a place for current, intermediate and long term assets along with the current, intermediate and long term liabilities. One problem that is identified on many farms is the lack of current balance sheet reports. It is recommended your farm has one on file every year on December 31. Another problem that is rather common is the lack of detail and inaccurate information that is posted on balance sheets. Just leaving last year’s numbers alone without annual adjustment for current market conditions can render the value of the annual balance sheet inaccurate and of limited value. It takes time to build a good balance sheet but it is one of the foundations to start any farm transition plan. Keep in mind that if you have an incomplete or inaccurate inventory you will have an incomplete or inaccurate transition plan.
Steps in getting your farm transition plan in place:
- First line of paperwork is a will and/or trust
- Second step is to make sure you are maintaining a current and very detailed Balance Sheet inventory.
- Are members of the family farm business setting goals?
- Develop a vision for the farm business that focuses to a transition plan.
- Balance farm and non-farm issues that impact the farm business transition.
Farms are often treated as a part of a farm family’s tradition that is often handed down from one generation to the next. Every family farm situation has a little different set of circumstances so there is no universal plan that will fit every situation. Additional resources and information can be found on the MSU Extension FIRM web site.