Did you know the Kansas producer’s average age is 58? This indicates there will be a major transfer of farm ownership throughout the next twenty years. Throughout the Post Rock District, we understand the value agriculture-related businesses bring to our communities. The ability for a business to transition into the next generation impacts the family of ownership, the employees, and those that rely on the business’s services.
While the long-term objective of “passing the business on to the next generation” is easy to dream about, accomplishing the goal requires lots of planning, preparation, and communication.
K-State Research and Extension suggests working through twelve steps to increase the possibility of a successful transition. Each step is briefly outlined below. However, there is a publication available that explores each step in greater detail. You can access the publication here.
STEP 1: What Matters Most — Identify the core values that lay the foundation for all of the planning to follow.
STEP 2: Wants, Needs, Hopes, and Fears — It is often difficult to discuss the wants, needs, hopes, and fears associated with transitioning a business and “way-of-life” with family members. Yet, taking the time to understand each individual’s desires and concerns will ensure better decisions are made as you continue to plan.
STEP 3: Establish Vision/Mission Statements, Objectives, and Goals — Many times, business partners have differing ideas about how to use the same resources. Identifying a common vision will lead toward a mission for the business and your transition planning. This will help formulate long-term objectives and shape short-term, attainable goals.
STEP 4: Human Resource Evaluation — It is important to identify the strengths and weaknesses of the individuals involved in day-to-day business operations as well as the transition process. People must be in positions in which they can thrive and contribute to the operation’s success.
STEP 5: Who is in charge? — Having a clear understanding of what is expected and how decisions are made is an essential part of transitioning a business. In order to successfully transition to the next generation, decision-making authority needs to transition over time as well.
STEP 6: Where do we stand financially? — Without a clear and detailed picture of the business’s current financial condition and its future capability, it is very challenging to develop a feasible transition strategy that will support all individuals, families, and generations involved.
STEP 7: Do we have what we need? — Developing an inventory of resources (land, machinery, buildings, financial resources, community services, people, etc…) available to the operation will help identify how the vision, mission, objectives, and goals can be achieved. This also helps identify areas where more resources are needed.
STEP 8: SWOT Analysis of Internal/External Factors — Management strategies can be determined when strengths, weaknesses, opportunities, and threats are clearly identified and understood.
STEP 9: Evaluating Financial Feasibility — Completing a financial projection helps place the business goals you have set on a financial roadmap that is achievable.
STEP 10: Developing a Business Plan — A business plan incorporates everything that has been evaluated, discussed, and planned out in the previous steps. A business plan is an effective way to communicate current and future practices to family members and external partners (such as lenders and employees).
STEP 11: Estate Planning, Retirement Planning, and Business Entity Buffet — Working through the process of estate planning, retirement planning, and choosing an appropriate business structure will help protect assets and liabilities. There are a number of choices to consider. It is important to research your options and make the most effective decisions for your family and business.
STEP 12: Putting the Plan into Action — Transitions will happen one way or another. Developing a timeline can help hold all parties accountable and ensure that the transition process is aligned with your family and business interests in mind.