Eva Gabor’s “Green Acres” TV sitcom character, Lisa Douglas, may have had it right almost 50 years ago: “Farm living’s not the life for me.”
Today, only 15% of the country’s current population lives in rural areas. According to the U.S. Department of Agriculture, 97% of the 2.1 million farms in the rural U.S. are family owned operations, but that number is shrinking. Farm Aid, a nonprofit organization whose mission is to keep family farmers on their land, noted that about 330 farmers leave their land every week.
Some of the migration from rural life to urban living is due, in part, to younger generations seeking greener pastures, higher education and social networking. As a result, farms that have been in a family for generations are being left with no heir apparent.
But make no mistake, succession is not just a challenge for today’s farming families. Most family businesses don’t make it past the first generation, which is why the declining multi-generational farming culture is distressing to watch.
The question of who is left to run the family business is almost always complicated. If you are working through a succession plan, here are some essential elements to consider:
- Make continued business leadership a key goal. This can be accomplished through a series of planned meetings with family-member owners to discuss their goals, wishes and concerns.
- Gather, analyze and share financial information on the company and on current owners, including ownership percentages, tax records and tax commitments, value of the business and organizational structure.
- Remember that taxes may be a key factor in any business transition. A comprehensive estate plan for any outgoing shareholder should be considered.
- Strive for balance of equity. Answer these questions definitively:
- How much will be passed on to the heirs?
- How many business assets will remain with the senior entrepreneur?
- Work hard to clear up the major muddy area of how much parental authority will be exercised over the children:
- How much should the senior entrepreneur pass on the children?
- How much should these children be required to earn and do for themselves?
With all that is at stake, it is a wise parent indeed who knows how to pass power to his child. ReGENERATION Partners can help you think through the issues and make decisions in the best interests of the business and the family.