Getting the next generation started into the business of farming is a monumental challenge facing many rural families. The rapid rising of land prices, equipment, and facilities over the last 30 years has created new barriers for those wanting to enter farming.
Almost every agricultural sector today is facing the grim fact that if current asset values are used, it is virtually impossible to show a positive cash flow when doing a startup budget. The reality check is that parents who are now looking at turning over their farms to their children were able to start their farming careers with a total investment of a couple hundred thousand dollars. Today for one family to earn a living from farming requires the use of assets valued well in excess of one million dollars. Sacrifices undoubtedly will need to be made and somebody will need to subsidize the entry for the next generation.
A successful farm transfer can be problematic if the parents do not have a clear picture of their retirement: where they will live, vacation, what they will do with their time, and most importantly, what all of this will cost. For parents, particularly fathers, sitting down and talking about retirement can be a difficult task.
The younger generation wanting to take over the farm will also need to sincerely ask themselves, “is this really what I want to do for the next 20-25 years? Am I willing to pay ‘the price’ through sacrifices of time and emotional energy to make a farm business succeed?”
This whole process can be boiled down into three fundamental questions that need to be answered by parents and children. (1) What type of financial arrangement needs to be put in place so that mother and father can enjoy a peaceful night’s sleep and not toss and turn wondering if they are making the right decision? (2) Is the dream of the younger generation big enough to continue to pull them out of bed every morning until the debt is paid? (3) Is it eventually possible to put together a deal that will satisfy the answers to questions one and two?
To help parents answer the first question, they will first need to determine if the farm business has the financial capacity to cash flow the debt that will need to be assumed by the children. Secondly, they must assess their confidence in their children: do they feel the next generation is capable of running a successful enterprise? Thirdly, they must determine how to treat each child fairly when it becomes time for the estate to be divided.
These three points can be summarized as: cash flow capabilities of the business, confidence in your children, and the capacity to be fair to everyone.
The younger generation must consider several points when answering their question about their desire to farm. How strong is your passion to be a farmer? Do you have the mental toughness that will be needed? Do you have the ability to work with and manage other people? Is your education extensive enough to help you see the ‘big picture’?
Putting the financial deal together is much easier if everyone has first sorted through the answers to their respective questions. Most farming operations already have access to excellent accounting and legal resources. If you are not confident in your advisers you should seek out individuals whom you deem to be competent.
Farming can provide a wonderful lifestyle. Transferring this lifestyle to the next generation can be done relatively stress-free through meticulous planning. This process takes time and requires patience on everyone’s part to ensure a happy ending.
Gone are the days when a farmer can work in isolation. Smartphones, text messages, e-mail, put many farmers in positions where they are required to communicate regularly with people all day long. Using technology to communicate with business colleagues is simple and easy compared to maintaining an effective communication dialogue with family – the people you love and care about.
Some days it can be almost impossible for farm family members to talk with each other without yelling.
Over the past few years, I have been privileged to work with farm family businesses that have wanted to improve their communication patterns. More bluntly put: these families were tired of the yelling, the slamming doors, the pouting, the cold shoulder treatment, and the awkward silence that prevailed at mealtimes and family get-togethers. I frequently heard comments like, “we can’t agree on things anymore, we don’t seem to like or even respect each other anymore. Are we the only family with these problems?” If you are reading this and are thinking, “ this sounds like us” rest assured you are normal. Working with the ones you are supposed to love is a daunting challenge.
Managing a farm today presents unique challenges compared to most other businesses as the labour pool and management are usually one and the same. To further complicate things, everyone usually lives on the job site.
The communication dilemmas most frequently experienced on farms are firstly, the father’s inability to communicate with his children (usually his sons), and secondly lack of communication between siblings.
A classic example of ineffective communication is illustrated in the following story.
Friday evening Father was in the milking parlor finishing the milking when his newly licensed 17-year-old son came rushing into the barn to ask for the farm pickup to go into town with his buddies. Father being a somewhat quiet fellow, had his head half buried under a cow’s belly. As he listened to his son’s request he rolled his eyes skyward and let out a grunt. Pulling his head out from under the cow to address his son’s request, he turned to see the milkhouse door slamming shut as the youngster ran for the house. Five minutes later while washing the milking equipment, Father looks out the window to see the tailgate of the new diesel pickup truck disappear down the laneway in a cloud of dust—the son had obviously interpreted the grunt to mean “yes”.
Father was still fuming and muttering as he stomped in the back door of the house. Upon seeing his wife he bellered, “that kid of yours just took the pickup without asking for my permission”. Mother using her carefully honed maternal skills asked father what actually had happened. Questioned and prodded, Father reluctantly admitted that he had not said yes or no, but had in fact just uttered a grunt. The mother knew their son had learned how to take advantage of his father’s communication weaknesses. Farm women seem blessed with the ability to know what is going on between their husband and sons without actually being present at times of disagreement.
To be an effective communicator takes practice and patience. It is vitally important to listen to every member of the family so that when you do speak others will understand what you are saying and not tune you out. Old communication habits die slowly but they can be improved. Searching out more productive ways to communicate with family members has immediate benefits. Reduced stress levels and happier people can frequently translate into a more profitable business.