Every farm or ranch will transition eventually, whether voluntarily or involuntarily. This blog is the first in a two-part series that will start the conversation about what you can do to make sure your transition is a successful one for both you and the next generation of operators.
What Is Transition Planning?
Transition planning is the process of deciding when and how you would like your business to be managed or transitioned in order to protect it, its employees and its value. Transition planning is a game of inches, and it starts with this question, “Is your business transferable?” Also ask yourself if your farm or ranch is a business or a lifestyle. The following additional questions are worth considering:
- Have you developed a mission statement, vision and values?
- Do you regularly set goals and establish budgets?
- Do you have written standard operating procedures?
- Have you developed an organization chart?
If you answered no to any of these questions, there’s a good chance you have operated your farm or ranch as your lifestyle. That probably worked for you, but is it what’s best for the next generation?
It’s never too early to start thinking about transition planning. Unfortunately, most businesses wait until there is a pressing need to do so.
How Do You Know When It’s the Right Time for You?
We have established a few key indicators that it is time for you and your business to start the process:
- Have you defined your personal goals and vision for the transfer of ownership and management?
- Is your successor identified and in place?
- Have you considered the importance of family involvement in leadership and ownership of the company?
- Are you currently using techniques to maximize value while minimizing taxes?
- Do you have enough liquidity to avoid the forced sale of your business?
- Do you have a contingency plan should you become disabled or die unexpectedly?
- Have you considered alternative corporate structures or share-transfer techniques to help you achieve your succession goals?
- Are you dependent on your business to meet your retirement cash-flow needs?
Once you have determined you are ready to start your transition planning process, then what? Wipfli can help. We have a team of Ag Business Transition specialists who can take you and your business through our agile, three-phase process. Tune in to part two to learn more.