Succession Planning
Definition
Succession Planning is the process of transferring knowledge, skills, labor, management, control
and ownership between generations. Successful farm and ranch generational transfer depends in
part on the financial and business aspects of the farm or ranch, but also in part on anticipating
and preparing for adverse events that could disrupt management and ownership succession. Open
communication and sharing of expectations and goals is crucial to a successful transition.
Learning Objectives
At the end of the course, participants will be able to:
 Identify the differences between Succession, Business, Estate and Retirement Planning.
 Explore communication barriers that hold back succession planning.
 Use SWOT analysis as a management tool in the farm or ranch business.
 Explore the components of fair versus equal.
 Access succession planning tools and resources.
 Discuss the interaction of tools in the implementation of a transition plan.
 Understand how to develop a succession plan incorporating the knowledge and skills
learned throughout the course.
 Initiate a family conversation to begin the process of creating a written succession plan.
 Develop and implement a succession plan within six-months of completing the program.
Overview
Historically, relatively few farm and ranch businesses have survived the generation of their
founding. In most instances farm and ranch businesses go through a business life cycle with the
firm peaking in efficiency about midway, followed by a decline in later years. The Small
Business Association cites lack of succession planning as the reason only one third of first
generation businesses survive to the second generation.
Figure 1: Business Life Cycle
Figure 2: Business Life Cycle w/transition plan
Figure 1 illustrates the single life cycle farm or ranch business and Figure 2 illustrates the farm
or ranch business life cycle with a successfully implemented succession plan. The development
of a succession plan, using the tools of this course, is designed to move the farm or ranch
business to the succeeding generation or generations. With SMART goals, good communication,
and properly developed management; succession planning will introduce efficiencies allowing
succeeding farm and ranch business life cycles to exceed the peak of the single business life
cycle farm or ranch.
Succession planning is simple, just not easy! For farm and ranch businesses having the
continuation of the farm or ranch business beyond the lifespan of the founders as an objective,
succession planning can provide valuable guidance as individuals move into and out of the farm
or ranch business within their own life cycle.
The critical issues in developing succession plans are:
 Communicating between generations their expectations and goals.
 Successfully dividing income between generations.
 Planning for a gradual shift in management and the associated decisions from one
generation to the next.
 Shifting ownership of the assets from one generation to the next.
 Anticipating and planning for events that could disrupt management and ownership
succession.
Succession planning includes seven major elements:
1. Building a management team.
2. Addressing power issues.
3. Minimizing the impact of disruptions that could derail the succession.
4. Assuring that each component (generation) has fair compensation.
5. Valuing each party’s ownership interest.
6. Protecting the minority owners and off-farm or ranch heirs.
7. Encouraging older individuals to enter a phased retirement, expediting business and asset
transfer.
A satisfying succession plan for the farm or ranch depends heavily on the personality types of the
individuals involved. A carefully considered and thought-out succession plan can be helpful in
shaping expectations and in providing a frame work for implementing the steps needed for an
efficient and tranquil transition of the farm and ranch business.
[Source: Adapted from: Neil Harl, Agricultural Law Digest, September 5, 1997]