Returning To The Farm
Lessons From 20 Years Of Seminars
John R. Baker
Attorney at Law
Beginning Farmer Center
jrbaker@iastate.edu
1.877.232.1999
Photos by USDA NRCS
VALUES
What is important to me?
VISION
What do I intended for my future?
MISSION
How will this farm business create that future?
GOALS
What do I need to do to insure the farm will create that future?
OBJECTIVES
How will I measure progress in accomplishing the goals?
STRATEGIES
What is my plan to reach the goals?
TACTICS
When and how must the actions to implement the strategies be done?
THE FARM
Owner’s priority
Owner’s priority
Continuation of farm family business
Continuation of family ownership of farmland
SUCCESSION PLAN
ESTATE PLAN
Assets Money Management
RETIREMENT
BUSINESS
SUCCESSOR
HEIRS
Two Views
• The first was developed by me.
• The second was Developed by Joy
Kirkpatrick, Center for Dairy Profitability,
University of Wisconsin.
Business Succession Planning
Owner Generation
Values – What is important to me?
Vision – What does my future look like?
Mission – Why am I here?
Goals – What do I want to do or be?
Objectives – How will I measure activity?
Strategies – What is my plan?
Tactics – How do I implement the strategies?
Self-Assessment
Skills
Abilities
Essential Planning Skills
Communicating
Decision making
Conflict resolution
Successor Generation
Values – What is important to me?
Vision – What does my future look like?
Mission - Why am I here?
Goals – What do I want to do or be?
Objectives – How will I measure activity?
Strategies – What is my plan?
Tactics – How do I implement the strategies?
Self-Assessment
Skills
Abilities
Essential Planning Skills
Communicating
Decision making
Conflict resolution
Business
Resource inventory and analysis
Physical – Short, intermediate and long term property.
Financial – Income statement, balance sheet, financial ratios.
Personnel – Human assets.
Planning should be done
simultaneously because all
planning areas influence one
another.
Business Planning
Opportunities
Threats
Strengths
Weaknesses
One year
Two years
Five Years
Ten Years
Essential business principles
Values - What is important to our business?
Vision - What does the future look like?
Mission - Why are we here?
Goals - What do we want to do or be?
Objectives - How will we measure activity?
Strategies - What is our plan?
Tactics - How do we implement the strategies?
Retirement Planning
Timing
Residence
Income Source
Household Budget
Recreational Needs
Health Care Needs
Long Term Needs
Transfer Planning
Income
Amount
Source
Method
Household Budget
Management
Assets
Estate Planning
Equal vs. Equitable
Business Assets
Personal Assets
Consistency
Flexibility
Legal Documents
Liquidity Needs
Tax Consequence
6
Returning To The Farm
A four day seminar for farm family business
owners, operators and successors.
Attendance by the family is mandatory.
The Seminar answers three questions:
Where are we now?
Where do we want to be?
How are we going to get there?
Subjects
• The subject for a farm family business
succession planning seminar are:
– Farm
– Family
– Business
– Succession
– Planning
Farm
• History of the farm.
• Ownership: Who owns what and how do
they own it?
• What is the value of the farm assets?
• Who is going to inherit the land and how will
they own it?
• Who will own the land and who will operate
the farm business?
Family
• Communication: Do they talk about the
future of the farm family business and what
do they talk about.
• Understanding the differences between
family and business.
• Expectation and assumptions of the owners,
operators, successors and heirs.
Each Family Member’s
• Wants
• Needs
• Expectations
• Fears
The Family Business
• Identify who will own the business assets.
• Identify who will manage the business.
• The heirs want participation in:
– Ownership
– Management
– Income
• Allocation of profits and losses
The Family Business
• A family business conflates the family
system and the business system.
• The more closely family members work
together the more difficult the conversation
about the business becomes.
• Expectation and assumptions are made and
remain unspoken.
Structure
• The Structure Of A Family Does Not Change
The Family Tree.
• The Structure Of A Business Must Change
The Organization Chart.
Succession Planning Is The Planned Change
Of The Organization Chart.
Two Different Systems
 Family is inward looking
• Business is outward looking
 Family avoids risk
• Business seeks risk
 Family focuses on emotions • Business focuses on rationality
 Family seeks stability
• Business seeks change
 Family does not count cost • Business tracks cost
 Subconscious decisions
• Conscious decisions
Two Different Systems
The FAMILY system
Attributes of a successful family
Loving
Loyal
Affectionate
Supportive
Empathetic
Understanding
Enduring
Communicative
Two Different Systems
The BUSINESS system
Attributes of a successful business
Efficient
Profitable
Goal Directed
Effective
Aggressive
Evaluative
Innovative
Proficient
Which System Is Appropriate
• Identify the appropriate system in which the decision
must be made.
• Use language appropriate to the identified system.
• Use the appropriate criteria for the decision.
• Consider the impact of the decision on the business
and the family.
• Select the decision that has the most positive impact
on the business and the family.
Business
 Resource inventory and analysis




 Physical – Short, intermediate and long term
property.
 Financial – Income statement, balance sheet,
financial ratios.
 Personnel – Human assets.
Strengths
Weaknesses
Opportunities
Threats
Succession
• Identify a successor.
• Inform the successor.
• Transfer:
– Money
– Management
– Assets
• Inform the non business heirs.
Farm Business Succession Planning
Here and Now
When is “then”?
Where is “there”?
There and Then
Here
There
What is here?
Why is it here?
Who is here?
Why are they here?
What are they doing?
Why are they doing it?
How is it being done?
How well is it being done?
Profitable?
Increasing wealth?
What is there?
Why is it there?
Who is there?
Why are they there?
What are they doing?
Why are they doing it?
How is it being done?
How well is it being done?
Profitable?
Increasing wealth?
Farm BusinessWhenSuccession
Planning
is “then”?
Here and Now
Where is “there”?
There and Then
Now
Then
What is happening:
In our industry?
On our Farm?
In our lives?
In our family?
What is happening:
In our industry?
On our Farm?
In our lives?
In our Family
Planning
“Plans are nothing. Planning is everything.”
General Dwight Eisenhower
Knowing what to plan is important but can only
be accomplished when how to plan is known
and used.
Why Don’t People Plan
People Don’t Plan Because –
They Believe Its Too Complicated
They Don’t Like To Plan
They Must Face Their Own Mortality
They Want To Avoid Family Conflict
The Critical Path
• Identifies necessary resources
• Analyzes a complex project
• Calculates the minimum time for completion
• Prioritizes activities
• Effective schedules and monitors progress
• Focuses on the essential activities
• Provides a graphic view of the plan
Activities
• Sequential activities are dependent on other
activities being first completed.
– Sequential Activities must be completed in an
ordered sequence.
– Each activity in the sequence must be completed,
or near completion, prior to the start of the next
activity in the sequence.
• Parallel activities are not dependent on the
completion of a previous activity or activities.
Methodology
List all activities in plan
List the earliest practical start date; estimate length of time to completion; if the activity
is parallel or sequential; how to measure the activity; who is responsible for the activity;
and how and to whom the activity will be reported.
The context of the activity determines if it is parallel or sequential.
Activity __________________________________________________________
Start week __________________________
Number of days to completion ________________________________________
Sequential & dependent upon ________________________________________
Parallel _________________
How will the activity be measured? ____________________________________
Who is responsible for the activity? ____________________________________
How and to whom with progress be reported?____________________________
List all the activities need to complete the plan
Caption graph paper with
the time periods needed to
complete the plan
Copy activities in the appropriate time period
•
•
•
•
•
•
•
Begin with the activities with the earliest start dates
Show the activities as arrows the end with a box
Show the time to complete the activity above each arrow
Show whether the activity is sequential or parallel
Schedule sequential activities in the order to be performed
Parallel activities must not conflict with sequential activities
Allow for unexpected
• The Critical Path is the list of sequential activities
leading to the completion of the plan.
• Any delay of in the start or completion of an
activity on the critical path will delay the
completion of the whole plan.
Critical Path Method Chart
Weeks
1
2
3
4
5
6
7
8
9
10
11
12
The Critical Path
Sequential ------------------------
Parallel --------------------------
13
14
15
16
17
18
A Fifteen Year Plan
• Five years as a junior partner
• Five years as an equal partner
• Five years as a senior partner
• Retirement at fifteen years
RETURNING TO THE FARM
Friday 8:30am – 5:00pm
Welcome
What Are We Trying To Find Out? – Overview and Introduction
What Did You Say? – Communications
Wants, Needs, Expectations, Fears
LUNCH PROVIDED
Retirement Planning – Discussion and planning
Can’t We All Just Get Along? – Family Business Meetings and Resolving Conflicts
Saturday 8:30 – 3:00
The Most Important Things In My Life Are… – Identifying your values
Planning with intent – Visioning the Future & Defining the Mission
LUNCH PROVIDED
Setting the Guideposts – Why and How to Set Your Goals
Using financial Statements
Friday 8:30 – 5:00
How are you doing? – Reviewing your progress
Agricultural Outlook
Strategic Business Planning
LUNCH PROVIDED
Transfer Planning – Transferring Money, Management and Assets
Estate Planning As A Part of the Succession Plan
Saturday 8:30 – 3:00
Who Can Help? – Available resources
Owner and Successor Panel – Success Stories From Producers
LUNCH PROVIDED
The Critical Path Method – Managing The Planning Process
Presented by:
John R. Baker, Attorney at Law
Beginning Farmer Center
www.extension.iastate.edu/bfc/
877.BFC.1999
Providing such programs as Farm On, Ag Link Seminar,
educational materials, individual consultation,
International Farm Transition Network