Farm Business Succession Planning
John R. Baker
Attorney at Law
Beginning Farmer Center
jrbaker@iastate.edu
1.877.232.1999
Photos by USDA NRCS
Acknowledgments
Andrew Errington – University of Plymouth, UK
Walter Warrick – Prof. of Bus. Mgt, Drake University (retired)
Don Hofstrand – Farm Management Field Specialist (retired)
Beth Fleming – Family Resource Management Specialist (retired)
Phil Hufferd – Farm Management Field Specialist (retired)
Mike Duffy – Professor of Agricultural Economics
Margaret Van Ginkel – Family Resource Management Specialist
Kelvin Leibold – Farm Management Field Specialist
James Jensen – Farm Management Field Specialist
Andy Larson – Extension Program Specialist
Dave Goeller – Farm Transition Specialist, University of Nebraska
Kiley Mars – Owner, InSightOut, LLC
Don't be afraid to ask dumb
questions.
They're more easily handled
than dumb mistakes.
William Wister Haines
A Critical Difference
How we define “family”, the priorities,
expectations, relationships, and
measures of success in a family are,
and should, be different than the
priorities, expectations, relationships
and measures of success in a family
owned business.
Identify Which System
• It is imperative that you identify and
operate in the system that is appropriate
in a given situation.
• It is appropriate to behave as a family at a
holiday.
• It is not appropriate to behave as a family
at a business meeting.
“Entry into farming
is a process, not
an event.”
Dr. Paul Lasley
What to do with the Farm/Ranch?
The essential question that must answered:
Do you want to transfer the
ranch/farm as a “viable business” or
simply as a “group of assets”?
THE FARM
Owner’s priority
Owner’s priority
Continuation of farm family business
Continuation of family ownership of farmland
SUCCESSION
PLAN
Assets Money
ESTATE
PLAN
Management
BUSINESS
SUCCESSOR
HEIRS
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 lives?
In our families?
In our industry?
On our farm?
What is happening:
In our lives?
In our families?
In our industry?
On our farm?
Why don’t we Plan?
• Too Complicated
• Don’t like to Plan
• Facing our own Mortality
Small problems are hard to
diagnose and easy to solve.
Big problems are easy to diagnose
and hard to solve.
Nicolo Machiavelli
The Prince, Book IV
When is it not necessary to develop
a farm business succession plan?
• When you do not care what happens to the
farm family business.
• When you do not care if your heirs own
and operate the farm family business.
• When you can afford to lose money or
assets or managerial control.
• When you do not care what happens to
your spouse.
ANSWER THE DIFFICULT QUESTIONS
Do the owners desire to continue family ownership?
Can the family withstand the stress of succession planning?
Can the family withstand the stress of not planning?
Is there a successor capable of managing the business?
Does the successor want to manage the family business?
Will the owners recognize the authority of the successor?
Will the owners transfer management to the successor?
Will the owners develop a business succession plan?
Are all interested parties identified, informed and involved?
Is there a mutually agreed upon decision-making process?
Is there a compatible vision for the future of the business?
Have the roles that need to be filled been identified?
Have successors been chosen for key positions?
Have training plans been developed for those positions?
Is there an estate plan with equitable division of property?
Have contingency plans been developed?
IF YOU WANT YOUR BUSINESS TO
CONTINUE BEYOND YOUR LIFETIME
– You must create a business
succession plan.
– Planning takes place when the seat
of the pants meets the seat of the
chair.
– Planning is not does not create
certainty.
– Making a PLAN will improve your
chances for a succession.
– To be effective plans must be
shared.
Planning is deciding
 How long the will the transition last
 What management decisions are
delegated to the successor
 Which assets are transferred and when
 When does the owner retire
 What retirement means
 What is the source or retirement income
Planning includes
implementing the plan
– Implementation requires:






Hiring professional advisors
Paying for professional advice
Reviewing documents
Signing documents
Transferring ownership of asset
Transferring management
Presented by:
John R. Baker
Attorney at Law
jrbaker@iastate.edu
1-800-447-1985
Beginning Farmer Center
www.extension.iastate.edu/bfc/
877.BFC.1999