Mail bag: next generation in cow calf and row crop operation

Shay

Foulk: Welcome back everyone to another episode of the Ag View Pitch. Today you have Shay Foulk and Chris Barron with a mailbag question. Chris, how are you today?

Chris

Barron: Good, how are you?

Shay

Foulk: Well, pretty good. A little foggy when we woke up here this morning, but I tell you, the, the rain that we've gotten here in north central Illinois has been a blessing. Anywhere from 2.5 to 6 inches, 7 inches rain in a 50-mile radius. So a huge change of pace from the last month or so. How are you guys doing on moisture?

Chris

Barron: Uh, just in time, not quite enough. Yeah, I guess is our scenario. I'm just in time off the top.

Shay

Foulk: Just in time, not quite enough. But you know what season's coming up next is better than expected.

Chris

Barron: I tell you.

Shay

Foulk: Yeah, exactly.

Chris

Barron: Yeah. I didn't think it'd be that good, but yeah, people don't like to be disappointed.

Shay

Foulk: Yeah, I think that's a good thing. Well, let's, uh, let's dive into kind of this scenario. And just a quick background for the listeners, uh, you know, I had a gentleman call me and say, hey, this is the situation I have going on. Um, you know, I'm not sure that we're ready or have need for utilizing you guys in a consultant capacity right now, but just wanted to kind of talk through our scenario, our situation. And so we had a good, good conversation, but I thought, you know, what's the best way that we can serve, uh, this person that had called us without, you know, just diving in and spending a bunch of time on, on something. And this mailbag is kind of a good way, I guess, for you and I to get our thoughts out there about the situation, about the scenario.

And even if you don't have a huge amount of similarities with this operation, I would encourage you to think about, okay, you know, what nugget, what one or two pieces can I take away from this as we, as we go through this discussion? So the information that was provided, uh, operator in the Midwest have a cow-calf operation, uh, farm about 2,000 acres. Row crop. Have two brothers, so the gentleman that called me and his brother are farming, uh, right around 60. Uh, one brother is a little bit younger than, than he is. No one else in the operation. Their dad is, um, you know, still involved, kind of shows up and does some stuff and is a financial partner in the business, but is, is phased out. You know, he's older. I don't know exactly how old, but I would guess in his 80s at this point. Uh, and then they have, they have a sister.

These two brothers, they have a sister, and that has two nephews or, uh, two sons. So it'd be these gentlemen's nephews that are interested in being part of the operation, uh, mid-20s. So they have the, the drive and the desire. And basically how it started was, you know, last fall they had the opportunity to get, uh, I think it was 15— yeah, 15 cows, um, And as they have progressed with that, prices have been pretty good on the, in the cattle industry here last 10, 12 months. And they've grown that from 15 to 50. And so they're starting to see the financial success and some of the decision-making that goes along with that. But the biggest question is how do we work them into the operation and transition, not necessarily like immediately responsibility.

But how do we work them in a way that is fair and equitable, but also with the realization that, hey, you have, you know, you have skin in the game, you got in at a good time, uh, you had some, some great opportunities and you've made a go of it. But how do you start to work them into the operation? Uh, they both currently have off-farm jobs, but it appears that they might be a natural fit and progression as part of the transition down the road. Uh, by the way, both the brothers are looking at roughly 8 to 10 years before they want to fully transition out. So they're enjoying what they're doing, but they also realize that, hey, there's other things that I want to be doing with my life. I've been doing this for 40 years, and as we know in the livestock industry, uh, things can wear on you.

The other thing that I would add— and Chris, you can interrupt if you have any questions— but It's, it's in a C corp currently. It's owned in thirds. And so the, the thirds will transition to the next generation accordingly. But, you know, what are the expectations of buyout? How do you transition that? The corporation owns all of the equipment and the cattle and the land is owned individually. So either the brothers or dad own the land individually, but the, the equipment and the cattle is owned collectively in that corporation. And the biggest issues that were highlighted here by the individual that called in is, you know, what most operations deal with is we have more people, there's more decisions to be made, you have different age groups, so maybe some communication dynamics or just differences in opinions or how things have been done, different ways of doing things, doing things.

And, and basically they just wanted to know, how do we, how do we get ahead of this, you know? And I applaud them, first of all, for reaching out and recognizing that, hey, we need to get this thing figured out sooner than later. But they're looking for a starting point, they're looking for some initial steps. Chris, what's your, uh, you know, maybe where's a good place to start? Where do you want to dive into this at?

Chris

Barron: I'll just tack on to what you just said. You know, the first thing is recognizing the need because too often, you know, this as well as I do, too often people have the need, they just don't recognize it. And so they just keep plowing through and they're really good producers and they do that and they do that well and they don't work on the business like we constantly talk about or don't have the desire to do that because it's not as much fun and it's— and it can be there can be conflict and all that kind of stuff. And people don't want to open up that essential possibility of opening up a can of worms when, you know, they want to, they want to open up a can of brand new cherries or something, you know?

So, but what I would say, you know, in answer to your question is that I think the first step and, and, you know, when, you know, you and I do this all the time when we start working with an operation, but that, that first step is defining what the, um, what the business wants to look like down the road. And that starts with the senior partners. And so as we do that though, when we say, okay, what in your guys' eyes, you know, the, the two brothers, you know, um, at their ages, you know, in the late 50s going into the 60s, is like, okay, um, a perfect world for me in 10 years looks like this. And then how does that fit for, for the kids? But first of all, they got to figure out what their vision is and where they want to go. And then as they do that though, in concert with that is defining what their roles and responsibilities and decision rights are that currently exist.

And once they map those things out, then it's— then it gets a little easier because you can say, okay, these are the things I don't want to do. So you can compartmentalize those roles, responsibilities, and decision rights and say, okay, when The next generation starts to come in at a management level, not just a work level, but, you know, they come in and, and are assigned some of these management level tactics. They're, they're clearly identified first of all. And then second of all, not only are they identified, but they are, um, they, they are put in a position to where they can cross-train them on how to make those decisions and how to think through those things and make sure that they're supplied with sufficient information. Because sometimes, you know, experience helps you make those decisions and all those kind of things. And so you have to educate that next generation.

And unfortunately, as producers, we're not the best educators because we've lived it and we can't understand sometimes why in the hell do they not understand what I'm telling them, or why don't they— well, they've been in a different situation. And so sometimes you actually have to live it and experience it a little bit, and then you— then the light bulb goes off. And so I think, you know, transition is not a, um, a one, one-and-done type of thing. It's, uh, it's— you start it, you map it out, and then, you know, kind of like the processes we go through, Shay, you know, it's the first part I just described, you know, the first part of probably a 10-part piece of, of what needs to be done.

Shay

Foulk: So, so I'll, uh, surmise that by saying, figure out what it is that you want in the next 10 years, because if you don't have that clearly defined, you're going to struggle on, on how do we transition, how do we bring them in? And that's where the unmet expectations come in, because the next generation might have no idea what you're looking to accomplish. And then all of a sudden you're like, well, you know, the senior generation gets upset because, well, they're not doing what I need them to. Well, they don't know what you need them to do. Right. So that's a big one. I would also interject at that point, you need to have a budget for transition.

And so if you currently do not have a plan in place of what do I need into retirement from a financial standpoint, this is 80% of the hurdle to transitioning partners and transitioning generations of the senior partner not getting their stuff together and saying, okay, here's exactly what I need for rental income. Here's exactly what I'm going to need out of the corporation or out of the farm business. You know, I want the corporation to maintain my truck if I'm still helping. I want them to pay for fuel. I want to make sure that if there's any, you know, houses or buildings involved in that, that they're maintained, you know, so defining what that looks like in retirement. And then I want to back up just a little bit, Chris, and say, if you're in this situation, it's really helpful.

One of the exercises that we encourage people to go through is look at where you've been and, and truly get out a pen and paper or on your computer or whatever and type up just a quick farm history. You know, how did, how did, how did your dad get started? How did your dad bring you into the operation? And I think that's actually a really important part because people have a tendency to think about transition with how they got started in the business. Well, you know, Dad brought us in and we bought, we bought part of the planter and then we bought into the cow-calf herd, and then, you know, we put up a pig barn that was owned 50/50. That's great how you did it. It doesn't necessarily mean that's what the future could look like or should look like. So map out where you've been.

And then really importantly, and this is, this is an exercise that's good to go through, like when we're there, of where are you at today? You know, what all exists? How do you map out who, who has the land ownership? How many acres are under management? Who has ownership in the C corp, what is the future of the C corp look like as far as, you know, transition when someday, you know, Dad's out of the picture or we're out of the picture, what is the plan for that? And then clearly map out from where we're at today to, okay, like you said, Chris, where do we want to go? What is the perfect picture in 10 years? Not only from an ownership and a management standpoint, but a financial standpoint. What's the vision for the business? Is there growth opportunities? Do you want to get better at what you're doing internally?

Uh, what opportunities are on the horizon, not just for growth but maybe partnership or collaboration? So starting with that foundation of the senior generation, figuring out, okay, what are our financial cash flow needs? And then on top of that, what do we want the business to look like? I think those are two really good places to start.

Chris

Barron: I would add to that then too, as kind of the next step, is You know, you talked about mapping out where you've been and then we, you know, we talked about where are you at and then that perfect world. But in that process, the other component to that that we typically will be doing then is, is mapping out the business structure. So you talked about the C corp or whatever. Yeah. What's, what's in that and what makes the most sense from a tax perspective to transition that, that reduces the tax liability to the senior partner and also creates an opportunity for the next generation to acquire equity and minimize the tax consequences. There's no way of getting out of paying taxes, but you can— you can— there's some smart ways to go through that process. And so, as you know, Shay, that's kind of different for every operation.

But the one thing we always try to do is get all of the rolling stock into, into different buckets. And so like in this case, having the cattle and the machinery in the same bucket.

Shay

Foulk: Chris, we got cut off there, but essentially what we were talking about is, you know, the structure of things and how, you know, a cow-calf operation is not the same thing as equipment ownership, and it's definitely not the same thing as having, uh, semi-trucks and trailers that are going across the road. So go back to your thought on structure there and kind of, you know, how to think about this in a scenario like we're presented.

Chris

Barron: Yeah, I'm not exactly sure where we got cut off, but I'll hit the kind of highlights on that again. You know, the thing to think about though is that there's tax consequences, there are operational productivity levels that are variously, that are different from one entity to the next. And so we want to make sure that we isolate those individual profit centers in their own bucket so that, that way we can measure where the profitability is. It allows the, the partner— partners then to transition divisions of the business or portions of divisions of the business based on what their tax situation is and what maybe works best for the next generation as well. And typically rolling stock is a really excellent place to move things also from a liability standpoint too, because, you know, typically the senior partners have the majority of the equity.

And so there is a threat there in the event you have a loss, you know, on the highway with a semi or with a tractor or a piece of equipment or whatever that, you know, if there would happen to be a lawsuit or something along those lines, they're going to come back on everybody. And if you can get the senior part partners eventually out of owning the rolling stock, especially semis, then it just further isolates them from a liability standpoint.

Shay

Foulk: And for the listener that we're recording this for, just in general, I want you guys to really pay attention to that from a liability standpoint. You know, you're 60 years old and everything's in that C corp. You know, land is owned individually, but you still have everything at risk if the ownership is shared in that corporation. That if you have a semi going down the road and some bad accident happens, whether you're at fault or not, you know, the reality is today someone's going to sue you and they have access to the rest of the corporation. They have access to those assets, to your cow-calf herd, to your equipment, to everything else. And so any degree of separation that you can put between your entities and the portions of your business that are at different levels of risk, and segregate that not only for liability but also for accounting.

Because the point that I want to make here for the next generation coming in, if you're stepping into something that's already this muddy puddle of stuff, you know, the farm is all in one and the equipment's all in one and the, you know, the cow-calf operation is all in one and you're stepping in in your mid-20s, early 30s, and you don't have a clear picture of what's profitable and how things cash flow. And by the way, Chris, you mentioned that a lot of times in agriculture, we're not the best teachers, you know, for senior generation bringing in the next generation. Why, why would you want to step into a muddy puddle if you're that senior generation transitioning out? Don't do the next generation a disservice. Give them the opportunity to learn the business by having clear processes, clear accounting, clearly defined, you know, P&L, cash flow projections, things like that.

Otherwise, you're asking them to come into a house that's in a certain degree of disorder or disarray. Now, again, for this, this operation, this scenario, I'm not saying that's the case. I'm saying that we often see that. And so how can you prevent that, you know, as you transition to the next generation, or as you think about how do we incorporate these, these, uh, two eager, interested young men into our operation? How do we, how do we make sure that they're set up for success?

Chris

Barron: Yeah, one, one other thing I would add to all this too, that, you know, it can— it probably needs to be one of the first things that I, I didn't mention, but, you know, anybody that's listening to this that has already worked with us understands this, and they're going to be like, yeah, we've discussed this, but if So it's the first time you're thinking about transition or you're working through this, you know, you really need to identify who your, your resource team is, you know, your strategic resource team, which is essentially your attorney, your CPA, your lender, your insurance agent, a financial planner, and somebody that can kind of help you facilitate the communication with all of them in concert.

And so, you know, I, I would recommend you write that down and, and then ask yourself, and then write down who it— who are those people in each one of those categories, and make sure that they, they do a really good job and they're the right ones. And then also, you know, who is the— if you're going to transition, a lot of times transitions take 3 years, 5 years, 10 years, depending on the operation, the size, and the scope, and what they want to do. And so, you know, if you've got an attorney that's in their 60s, are they going to be the one that's around, you know, through that whole transition? If they're not, then who is their backup? So, you know, I always like to have a resource person on the bench, too, just in the event that that person's out of the picture or gets hit by the proverbial beer truck. You want to make sure that they're, you know, that, that you know who you talk to.

If you got— if you're halfway through an estate plan with an attorney and the attorney gets hit by a beer truck, who are you talking to then? Because that attorney knows what's going on. So make sure you have backups. In each of those categories.

Shay

Foulk: And, and like where we fit in, just into this picture for, you know, people's understanding, as an ag facilitator or consultant like us, our job is to put the whole picture together. You know, we tell people that we don't— we're not attorneys, we're not insurance agents. We could play them on TV if we needed to, but the idea here is, you know, we farm, we live and breathe this. We've gone through transition. I'm going through transition currently. We've worked with hundreds of progressive farm operations that have done this process. So it's knowing what are the, what are the steps and what order do the steps need to be done? And then how do we benchmark and check against that to make sure that we're doing it so that we have the best success possible, not just so it's done, but so that we're doing it the best way possible for the future of our farm operation.

So, you know, doesn't have to be us. That's not what I'm saying. I'm saying find an ag facilitator, find someone that understands the big picture here. Because an attorney, you know, we kind of refer to this as ag facilitators. We're, we're like a Crescent wrench, right? We can be half-inch, we can be quarter, we can be three-quarters, whatever. You know, nothing against attorneys or insurance agents or whatever else, but they might just be a 9/16-inch wrench. You know, they're really good at the piece of the puzzle at what they do. But maybe your CPA shouldn't be the one that's doing your transition planning, and maybe your insurance agent shouldn't be the one that's thinking about how the next generation gets incorporated. And this is all to drive home the point, Chris.

I think you and I need to do a 19 Minutes podcast on this, but, um, you are not playing the same game as your neighbor is, meaning your situation, your scenario, how Jim Bob down the road did his transition, even if you're both farming corn and soybeans and you both have a cow-calf operation, how they did transition might be the exact wrong way or a bad way for you to do it because you guys have different goals, you have different alignments, you have different trusts and corporations set up and things like that. So I guess I've just, I've really come to realize that, that, you know, us and the farmer a mile up the road that are both farming corn and soybeans, we're not even playing the same game. We're in totally different leagues, totally different, like almost industries. You're not, but you're, it's just totally different.

Chris

Barron: Right. The other thing I would add to that, Shay, is that, you know, we talked about the attorney, CPA, lender, insurance, financial planner, and, you know, a facilitator that kind of brings all of them together. Like you said, sometimes, you know, I mean, some operations maybe do have an attorney or a CPA that has that capacity and can do that well. And that's great if you do. But the other side of that is, is make sure that you have third party helping you with team health and communication, roles, responsibilities, accountability charts, those kind of things, so that, that you create a clear picture moving forward. And so that's kind of where essentially that third party person comes in.

And again, maybe you do have an attorney that can, can work through team health and all those things and help you put together an accountability chart and a, um, you know, in a, a vision for the business and clearly map that out, but that has to be done. And, you know, I always relay this back to my own farm operation. I mean, you know, Shay, we do this stuff and I bring a consultant in, you know, twice a year to help us with our family business because we're all family, we're all engaged in the business and, and there's emotional things and there's issues that come up throughout the year every year that need to be on the table and discussed in a professional manner.

And it's just really super helpful to have a third-party perspective because a lot of times that third party can ask questions that the son can't ask the dad, or that the, you know, the grandpa wants to get across to everybody but doesn't quite know how to say it.

Shay

Foulk: And, and I'll push back, I'll push back a little bit that the attorney is not the right person for that, even if they can facilitate team health. Because, you know, if you have 4 people involved in this operation, 2 in their 20s and 2 in their 60s, you know, that, that youngest member should be able to call someone and talk through the challenges and struggles and problems that they're having. In, in the oldest generation should be able to call someone and like you just said and say, hey, Chris, Shay, Joe, Jim Bob, whoever, you know, this is what we have going on. What, you know, what are your thoughts on this, or how do you work through that? The attorney is going to charge you $350 an hour for that phone call.

It's, it's more important to have someone that's invested in your business, invested in your operation, and truly wants to make sure that you guys have the ultimate success that you can have realizing the importance of, of what it is that you're doing and what it is that you're trying to accomplish. So, you know, find, find that person. It's not always a family friend, it's not always someone nearby in your community, but find someone that cares about your business as much as you do.

Chris

Barron: And somebody that can— I mean, I just was with two different operations earlier this week where we worked through core values. And, you know, that's the other piece of that too, is, is like I said, you know, the, you know, what are the core values of the business? And it's back to that team health thing that you know, we were just talking about that, that piece is ultimately probably the piece that determines whether or not the legacy goes on generation after generation. Because you can get all the numbers right, you can get all the math right, you can have a ton of money, and people screw stuff up. And so, you know, how do you get the people part right so that everybody is on the same page, everybody's professional?

Because, you know, and you know this, Shay, I mean, I would say businesses that we work with would tell you, you essentially all of them, especially after we've worked with them for a little bit, they would tell you, we have a business and we happen to farm. They're not a farm that's trying to be a business, you know, and a lot of that's the case in probably most farm operations are trying to be a business. But ultimately, the goal is, is to develop the business. And then you just happen to farm. And I think that's, that's really the key. And that's what takes care of the family. That's what takes care of the, you know, the financials. That's what takes care of the people and launches everybody so that you can go from one generation to the next, which is really— that's ultimately our goal.

You know, the reason we're doing— the reason, you know, the reason I started doing this and I think the reason you're doing this too, Shay, is because we want to help people be successful generation after generation, not just now, but it's like generation after generation.

Shay

Foulk: Mm-hmm. Let's, let's refocus. I appreciate the kind of sidetrack on that because it's important for people to understand the value of that strategic resource team, like you said. So going back to surmise that, get us, get your strategic resource team in order, make sure that you have the right people on your side because the cost of it, you know, it's not the cost of what it costs that you're writing a check for to have the right people on your team. It's the opportunity cost of the tax savings that you have of having your business implode in 10 years because you didn't do the right team health stuff, of unmet expectations and sleepless nights and people not getting together at family gatherings because you had a big blowup in the shop because, well, I thought we were gonna do this and you said we were gonna do this.

And like, that's the, that's the stuff that we're trying to avoid and make sure that you have a good, healthy, long-term business and family relationships so that everybody can sit down at the Thanksgiving table. You know, look each other in the eye and be happy for each other. You know, the other thing with that, that I see as an opportunity or two opportunities that I see out of this is you have a diversity in the businesses of what you have going on. So you have the row crop operation, you have the cow-calf operation. So there's a huge opportunity to define roles and responsibilities and give them not only ownership, but, but the responsibility that goes along with the ownership of you are in charge of this..

And so, you know, comments have been made, not, not just in this operation, but in general of, yeah, it's great that we have a mid-20s that wants to be a planter operator and they go and get seed corn and that's great, but we want them to have more responsibility than that. You know, you are responsible for the agronomic outcome of this field because you are the agronomic decision maker. You know, that's, that's a lot of weight. That's a lot of responsibility. It also carries, financial burden too. So how, you know, how can you separate some of those roles and responsibilities? Um, and there's also aspects within that of, are you responsible for the mechanical side or the logistics side of the operation or, uh, the agronomic planning, the marketing, the, the cow-calf operation? Are you responsible for herd health or marketing management or pasture management, feed management?

There's all these different areas that if you dissect and like you said, Chris, write down what are all the things that you do in the business. And if you're the senior generation, you know, what are the things that you would like to do less of and what are the things that you would like to do more of and pass off some of those responsibilities? I mean, don't just give them all the crap jobs, but give them the pieces that you're like, you know, I've done, I've done the backgrounding forever. I don't need to do that anymore. You know, I'm willing to pass that off to the next generation. And with the row crops too, again, from a roles and responsibilities and the opportunity for people to have management, I just, I see those two areas as having a tremendous amount of opportunity, I guess, in this situation.

Chris

Barron: Yeah. And just to tack on to that, you know, it's, we've been kind of dogging everybody on our inability to train well, but you know, it's, it's all about, you know, education. It's like living it and breathing it for a while and then making sure the training there But just to tack on and to really emphasize what you said about the responsibility is if, if the senior party assigns responsibility instead of work and, and clearly defines the expectations and says, these are the things that I expect. And then, and then the other generation too has probably expectations, but getting those out on the, on the table, because the most frustrating thing is unmet expectations, you know, that's, that's what creates frustration.

And And so the other one, other piece I want to say there too is, and I still deal with this with my dad, he'd be like, you know, I need you to do this and this and this and expected me to be responsible. Well, then I would go do those things and then he'd try to micromanage or change how I was doing it. And I'm like, well, no, wait, you're, you're, you want me to be responsible for the end result? I'm going to do it my way. Right. And we would have, you know, conflict back and forth. Occasionally. And I think that's something that just to caution the senior partners, that sometimes they don't do things exactly the same way you did, but that doesn't mean it's wrong. And you're not going to be able to control them forever either. And so you can guide them, you can educate them, and you can lay out those expectations. But not everything has to be done exactly the same way.

Just, you know, it's the, it's the, the really bad words of, well, we've always done it this way, so we're not going to do any different. Well, no, the next generation does have some ideas. I mean, I'm dealing with that with my nephew, my son. They do a lot of things different than I would in our operation. But I just, you know, you got to decide which hill you're going to die on on some things too. It's like, you know, well, this one thing I am going to hold on to, but, you know, but I'm going to let you take those other 5 things and you run with them then, you know. And yeah, but the key is, is to not micromanage. Don't step in there and and, uh, you know, tip the apple cart over after they've, you know, they've loaded it up, you know, so to speak.

Shay

Foulk: I wanna, I wanna ask you a question, and, and I think I have probably some bias here, which is why I want your, your candid feedback on this. But a lot of times, this is for, this is for the next generation, you know, people that are 30s, 20s, whatever, is a lot of times we see senior generation that they're like, you know, I think, I think Shay, or I think, you know, Jim Bob, or whoever, I think they're interested in being part of the operation, but it just doesn't seem like they have the, you know, the, the investment or the financial drive, or, you know, the willingness to take on risk. I think that's the biggest one. They just, they just don't seem that they have the willingness to take on risk. And I do see a bunch of, uh, timidity, you know, people being timid about in, in your 20s and 30s, taking, taking on stuff. I've been the exact opposite of that.

Um, I, I've dove in headfirst on the financial side of things, and not, not sink or swim. I mean, we've done it in a responsible way, but I see so many operations that we work with that they're like, man, you know, Chris, it just doesn't seem like he has the financial drive or wants to invest into the business. And, and from my scenario, if you're the younger generation looking to get involved into this you should be the dog on a leash that's like pulling and barking to go chase that squirrel up that tree. And my analogy here is it's easier to pull a dog back on a leash than it is to try and push them forward on a leash. You know, I don't know if you've ever walked a dog on a leash before, but you try and push a dog forward on a leash and it doesn't work real well. It's pushing a limp spaghetti noodle, right?

And I think that's what some of these senior partners feel like, is they're trying to push this limp leash forward and get the next generation to have the financial incentive and get them to want to take on the risk, especially if you're in a successful operation. You know, I don't, I don't know much more about this business from a financial outlook or anything like that. But if, you know, if you're row cropping 2,000 acres and you got a cow-calf herd and have some corporations set up and stuff, you're probably, you're probably doing okay. You're probably making good financial decisions and in a good financial spot. And I think the senior generation says, well, you know, this next generation, they're too comfortable and they don't want to take on risk and stuff.

I— my question to you, Chris, is I have, uh, the drive and the desire, and I see the successful people and operations that we work with are the go-getters, the people that want to take on the financial responsibility, want to take on the leverage, want to take on the debt in order to have financial success. I see them as the ones being more, uh, progressive and the ones that are going to be successful down the road. Am I, am I too biased on that, or is that something that you think is more and more important as we move forward?

Chris

Barron: I think it's, it's two-part. So I think what you said, I think there are a lot of people that are that way, that are like what you just described, that, that do, that are drivers that really wanna jump in, that wanna take the risk. And, but I also, like you said, I think there's some out there that just, you know, would rather just get a paycheck, you know, and have somebody else take the, on the responsibility. And so I think it's incumbent upon the senior partner to identify what are the, what are the skill sets of the next generation, because, you know, you might have, you know, two successors coming back into the business and one of them's the manager and the other two are operators, right? And it's okay, you know, it's just everybody has different skill sets.

And so I think, you know, but that comes back to the senior partner having identify what are those, you know, what are those skills and, and what are the core competencies of each of the individuals that fit those areas that they pre-identify, like we talked about earlier, of these are the things I want to get off my plate. Well, is the capacity there for those next generations? That's how I'd answer that. The other thing I want to say though too, the other part of this is, in answering to your question, is that I think what some of the senior partners look at a lot of times is the life balance thing that this next generation has as a priority is slightly different than maybe some of the senior operators and how they look at it. It doesn't mean that it is different. It's just that, you know, I see sometimes the senior generation get frustrated.

It's like, well, We work, we've always worked on Saturdays in the off-season and they wanna leave and they wanna go to the lake or whatever, you know, I think those things have to be discussed too from a labor perspective and a time management thing. And I think, you know, we always talk to people about the importance of measuring time, which, you know, we get cross-eyed looks occasionally on that perspective, but you can't improve, fix, or adjust what you don't measure. And in some operations, and you've seen it as well as I have, Shay, some operations we almost just have to— if there's enough people involved, we need to start measuring time. Because what happens is people have a perspective and then somewhere— and then there's reality, and somewhere in the middle are the facts.

And so you have to kind of step back and say, you know, because what happens a lot of times if you get 2 or 3 family members working in the business and their spouses are watching them, from afar, they start to develop opinions of what's going on. And they may or may not be accurate opinions of who's doing what work, and this person's unfairly treated, and this person works too much, and this person doesn't work enough. And everybody's at different stages of life. And so I'm bringing that all the way back to the one thing I said about communication and team health. It's all about communication. Every single operation we work with, 100% of the time, the number one thing that needs to be dealt with is communication. And if you get that stuff right, it's just amazing how all this other stuff kind of falls into place.

Shay

Foulk: I really like that, and I appreciate your comments on that because, yeah, you know, I don't— we usually work Saturdays in our operation, and but doesn't mean I want to all the time. And if that's an expectation that's above and beyond, I think stuff like that needs to be addressed. So I appreciate that, you know. And, and the final comment that I would say on that scenario, or, or kind of this scenario too, is, you know, if you got two, two brothers, the nephews that are coming into the situation, you know, call them Jack and Jim or whatever, you know, if Jack is the manager and he's the leader and he has the business for the vision, uh, or vision for the business, excuse me, and Jim is the one that, man, he's a great mechanic, he likes doing agronomic stuff, but he doesn't He doesn't want to take on the risk or take on the ownership. Don't force that.

Because the other thing that you and I see, Chris, is, you know, brothers and, and partners and friends or whatever, usually brothers though, that have been in business for 30 years because that's how it was set up. And, you know, maybe, maybe one of them likes that side of the business and the other one doesn't. And that causes problems too. You know, not everybody has to be an owner-manager in a business. If that's not what is best for the business. And I'm really, you know, highlighting one of my key takeaways out of this discussion today, Chris, is, you know, my business happens to be a farm.

And if you look at any other business, restaurant industry, you know, equity management, whatever, you know, the equipment dealership, you're not going to force people into shared ownership if they're not the right person for the job and if they don't want that responsibility or that amount of risk. So why would you do that in your farm operation too? And I think the communication piece is, you know, hey Jack, hey Jim, are you okay? You know, what, what's your ideal role here? And if neither one of them are ones that want to take on that risk, maybe you need to find someone different to be the farm manager, farm manager for the legacy of the business long term. Or if you're staring at two highly competent people and they both can do it, maybe it'll work out great. Maybe they are the two that should have joint ownership and take it over.

But, you know, this all goes to say, Chris, that there's no cookie-cutter example. And I told this gentleman on the phone, and, and I'll tell anybody listening, if you're the one going through transition thinking about the future of your business, there is no cookie-cutter example. There are tried and true methods that work from, uh, a legal, you know, legality and accounting and, and things like that. We can get all that business structure stuff right, but you need to have, like you said, that communication, that open dialogue What are our expectations moving forward and what's the, you know, what's the biggest task in front of us that we need to tackle to make sure that this process gets started in the right direction?

Chris

Barron: Yeah. One of the things we always tell people is, you know, transition and succession is not a one-year thing. And, and you can get the plan put together relatively quickly, but then you got to live it. Right. And so it's an ongoing evergreen. Type of thing, kind of like your estate plan. I mean, you do your estate plan, it's not done because things change every year. And so, you know, I think it's just, it's just interesting to me how if you take care of your business and you manage your business, it will take care of your farm. And that's, that's what it amounts to. And that kind of stuff is not as fun as planting corn and harvesting corn or planting cotton and harvesting cotton or whatever you do, or managing the the cattle herd or the, you know, taking care of the hogs, whatever it is that you love to do, because that's why we do what we do, is because we love what we do.

But we have to take care of it. It's, it's no different than a marriage, you know, with our business. We have to, we have to cultivate it, we have to communicate in it, we have to pay attention to it every day.

Shay

Foulk: Yeah. All right, Chris, uh, so to wrap up, you know, we're, we're not working with this operation right now, but if you, if you gave them some you know, top 3 things that they needed to be thinking about or get started on today? You know, what are you leaving them with? What are you leaving the listeners with?

Chris

Barron: Okay. The first one would be define your perfect world. What's that look like in the next 10 years, 3 years, 1 year? What's that look like to get you there? Define what those roles and responsibilities are for yourself. The second one I would say is in the meantime, figure out your budget, figure out what you need to live so that you're comfortable and you are really happy with, with that. And so you can communicate that to the incoming generation, which is your retirement plan, by the way. So, you know, figure that out. And then the third one is, is I would say make sure that you have that structure in mind as you develop that out and clear communication with your attorney and CPA as to, as to what that perfect world looks like so that you can get that bridge built from where you are now to where you ultimately want to get to.

And then the last thing I'm going to add, a fourth one, is communication. Communication, communication is making sure that, that you're working on the team health and the communication. And people don't like surprises and people don't like unmet expectations. So make sure those expectations are clear. So those are kind of my four things.

Shay

Foulk: Yeah. So I got four too, I guess. The first would be if you're that senior generation, get with a financial planner. And map out what are your needs into retirement, what are your income sources, uh, what is— what does the buyout look like, or do you have any inheritance coming your way, do you have, you know, stocks and bonds and all sorts of things like that. So get that financial plan in order because that's one of the biggest sticking points. If you don't have a good grasp on that to start with, it's going to make it feel like you're pulling teeth or like ripping your fingernails out when you get into this process and you're 60% of the way done and then you get hung up on the financial side of things. So, you know, get ahead of that. Have a team. My number 2, have a team and a family discussion.

So, um, you know, we sit down with family twice a year and talk about what we have going on in our operation and the business, how the family is doing. You know, in this scenario, you got 2 brothers with a sister whose sons are looking to get involved in the operation. There's a lot of family involved here, and you got Dad that's still kind of, you know, part of it, financially involved, whatever. Just get together if it's appropriate with all the family members that should be there and say, hey, you know, this is what we're looking at. This is what we're thinking on long term. Because if you get everybody in the same room at the same time, same place, listening to the same message, then there's so much that you can avoid as far as miscommunication goes. So having those discussions is really important. And then identifying the roles and requirements.

So here's what Jack and Jim are good at. But here's what we need in the operation too, because you don't just need to add bodies just because they're family and they have the same blood and same last name. But what are the requirements for the business? You know, we need people to have this agronomic knowledge. We need people to have this mechanical outlook. And then finally, last thing I would say is time takes time. So it, it takes time to get some of this stuff put together. It takes time to think about what you want, but don't sit on it for too long. You know, start making plans, start taking action. But also, you know, we hear different messages at different times and we react to them differently.

So if you have the younger generation, Jack and Jim, and they, they hear what you're talking about from taking on risk and management roles and responsibilities and how do you fit in, and it might be a lot at once for them. So let it stew for a while, you know, take, take time to kind of develop, move into it gradually if that's the right option, or if they're ready to launch and you're ready to hand off control. You know, allow that to happen. Just allow time to take time. So, Chris, I, uh, I appreciate the discussion on mailbag question. If you guys listen to this and you found value in it, or there's something specific, you know, one or two nuggets that you took out of it, please, you know, give Chris or I a call, shoot us a text message, uh, leave a review in the podcast, uh, leave a comment. We, we would love to hear from you. Um, thank you, Chris, really appreciate it.

Chris

Barron: Yep, thanks. That's a good conversation. Thank you. Appreciate it.

Shay

Foulk: And for all of you listening, thank you for taking time for another episode of the Ag View Pitch, and we will catch you next time.