Transition Planning: 12 Steps to Keep the Family Farming

K-State Research and Extension - Brian Schurle, Rodney Jones, Duane Hand

Type: Article
Knowledge level: Introductory

Farm Table says:

Easy to read, clear steps to get you started.

This article outlines 12 steps that “can increase the possibility of a successful transition”

Step 1: What Matters Most

First step of this planning process is to identify the core values that lay the foundation for all the planning to follow.

Step 2: Identify Wants, Needs, Hopes, and Fears

  • What do I want to happen when the family farm transitions to new management?
  • What do I need to happen when the family farm transitions to new management?
  • What do I hope happens when the family farm transitions to new management?
  • What do I fear might happen when the family farm transitions to new management?

Step 3: Establish Vision/Mission Statements, Objectives, and Goals

Think in terms of identifying the vision that leads to the mission, which in turn formulates longer-term objectives, which lead to short-term, well-defined, and achievable goals. Then enterprises and activities can be selected that best use the resource base in the most efficient fashion.

Step 4: Human Resource Evaluation

Identify the strengths and weaknesses of the individuals involved in farm transitions.

Step 5: Who is in Charge?

The successor needs to make decisions, even if sometimes it becomes a learning experience.

Step 6: Where do We Stand Financially?

Is the business profitable, solvent, liquid, and efficient? Can the business repay obligations? Are changes needed or will the current operation achieve the objectives and goals already developed?

Step 7: Do We Have What We Need?

Step involves developing an inventory of the resources available. These resources include land, machinery, buildings, financial resources, community support and services, and people.

Step 8: SWOT Analysis of Internal/External Factors

Planning by identifying the Strengths, Weaknesses, Opportunities, and Threats identified with an operation allows families to determine management strategies

Step 9: Evaluating Financial Feasibility

This step involves developing a financial evaluation of your future operational plan. It may involve crop or livestock enterprise budgets, cash flow budgets, and partial budgets that show the results of changes in your operation.

Step 10: Developing a Business Plan

The business plan effectively communicates plans to lenders, investors, and partners, as well as internally to family members and employees. The business plan documents the financial viability of the business and shows that you have taken the time to think through the details required to succeed.

Step 11: Estate Planning, Retirement Planning, and Business Entity Buffet

There is a great deal of interdependence between the organizational structure (how decisions are made and who is responsible for what), business structure ( a legal form of the business), and financial structure (who or what owns the assets, and where does the income go?). This interdependence is further complicated because it has implications for estate taxes, income taxes, how the assets can be passed on to the next generation, and who gets the income.

Step 12: Putting the Plan into Action

Over this timeline, promises made must be kept. There must be respect for the needs of the retiring generation while allowing management to be passed on to the next generation.

2012 - United States - K-State Research and Extension - Brian Schurle, Rodney Jones, Duane Hand
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