Carr’s Capital: June 2011
By Milt Carr and Associates
Features Business & Policy Trade Business/Policy Carr’s Capital: June 2011 Milt Carr and Associates Time for a PlanLife has a tendency to race on without making any pit stops. It seems that the older we get, the faster the whirlwind pace of life can become. And the more complicated things become, the less time we seem to have to deal with these complications.
One of the areas where time seems to just buzz over is in business. Often it seems that a family farm spends a lot of time just keeping up with “keeping up.” As the poultry industry changes, the farm business evolves as well. Innovation seems to be the driving force for many farms and a lot of energy is devoted to keeping up with current changes and making improvements.
Often, it seems that not much attention is given to areas of the family farm business that should be addressed. Since we tend to focus on issues of immediate priority in life, we neglect areas that have greater consequences should they go unattended. According to the Canadian government and accountants involved with farm business, 85 per cent of farming families have not taken advantage of completing a proper succession plan or farm business plan.
Unfortunately, determining how the farming family will distribute the farm assets to the next generation is often not made a priority. What if Dad takes the family agricultural business and divides the shares equally among five children – one child is now a shareholder and full-time farming member of the family, while his brothers and sisters have become schoolteachers, firefighters, etc. They have moved on and have no interest in working the farm, but they have been willed a share in the farm. Complicating matters is that they now have children of their own.
Future concerns
In 25 years, the sibling who remained on the farm has a desire to hand this farm operation down to his own children or grandchildren, but without a proper plan he may find that now his nieces and nephews and brothers and sisters are all shareholders. How does he satisfy their requests and meet the objective that he has worked his whole life for, to build a farm that he could hand to his children?
Achieving family harmony is a challenge that requires careful consideration and handling. I am often asked, “How does planning actually protect me or give me direction to help me make a really good decision”? I am convinced that when clients develop a plan that includes the family farm business objective, legal agreements and discussions with accountants, asking the advice of a trusted business friend or family member who is looking after some of the farm’s business affairs, you can’t go too far wrong. It is unlikely you will have a great loss if you have asked this many people the right questions. The plan drives the questions and receives the answers from professional planners and certified farm advisors who can help steer you in the right direction.
Tough questions
In addition to keeping up with changes within their industry and keeping productivity levels high, farm families need to ask themselves some difficult questions and have a succession plan in place. Expectations and reality are often on opposite ends of the succession plan spectrum. The greatest stumbling block to the whole succession planning process is that the subject of the family farm is a very emotional topic. It is hard to state one’s feelings when the emotion is great. To tell one family member their direction is not the one you are taking is very difficult to execute because of the fear of hurt feelings. When subjects are going to cause grief, we generally avoid them. Typically, when given the choice between sitting down with your family to address some difficult questions about succession – an areawhere there doesn’t seem to be an immediate need for discussion – and talking about acquiring the latest in chicken feeders, we will choose the chicken feeders. Thus the topic of succession planning is often neglected.
There are no easy solutions, and no quick fixes. When it comes to operating a family farm business there are a lot of issues that require consideration. But one area that should not be neglected, and often yields the greatest punch to the family farm, is succession planning. It is such a delicate topic, yet it is one of great importance. So, when is a good time for a plan? If you don’t set aside some time to work through developing a plan, time might just pass you by.
If you would like more information about succession planning, feel free to drop us an e-mail at mcarr@carrassociates.ca, or if you would like us to address a specific topic or area of concern, please let us know.
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