Only about 30% of family-owned businesses survive to the second generation, while 12% survive to the third generation. Shockingly, only about 3% survive to the fourth generation and beyond, according to the Family Business Institute. How will your business survive to the next generation?
What would you like your business to look like five or 10 years down the road? Do you have a clear vision for where your business is going into the future?
Part of the problem with succession and transition planning is it feels like a long-term strategy, so we believe there is plenty of time to take care of it.
Another challenge for future strategy planning is the potential for controversy between family members or partners. Crucial planning often requires crucial conversations, which are easily put off or even avoided over time.
Listen to Chris Barron discuss the keys to farm transition success on the Ag View Pitch podcast.
Consider this checklist of nine activities to start or reinvigorate your succession and transition planning process.
1. Identify Your Team. This can include a CPA, attorney, lender, financial planner, insurance agent and facilitator.
2. Document Your Vision for the Business. Write down your vision; no one can read your mind. Include others in your family and operation to help you map out your operation’s vision as clearly and concisely as possible.
3. Determine and Document Business Core Values. Written core values will drive businesses culture. Hire, fire, reward and discipline by your values.
4. Map Your Current Business Structure. Literally draw out your current management and business structure. Once on paper, share it with your family and partners so they have a clear picture of what your business structure looks like and how it flows.
5. Map Your Ideal Business Structure. Outline the perfect business structure for your organization. What could or should it look like? Draw this separately from your current structure. This will help you have a clearer picture of where you might want your business to go in the future.
6. Review/Update Your Will. This should be reviewed every year.
7. Look for Gaps in Your Current Plan. This could include a lack of buy-sell agreements, insufficient life insurance, outdated guidance in a will or trust and unclear decision rights.
8. Document Your Family Governance Versus Business Governance. Define current and future ownership structure. Also assign decision rights with clear roles and responsibilities.
9. Stay Current on Tax Law Changes. Be sure your CPA understands your long-term vision and what you are trying to achieve over time to structure your tax plan accordingly.
Chris Barron is director of operations and president of Carson and Barron Farms in Rowley, Iowa. He is also a national financial consultant for Ag View Solutions.