5 Phases of Farm Transition

Oct 25, 2023 | Uncategorized

Each farm, ranch, and ag business transition is unique. That said, here’s a five phase recipe for success to incorporate the successor generation into the business management duties. Not all situations will hit all 5 phases, nor will all operations spend equal time on all 5 phases, but this is an outline for you to consider regardless which generation you are.

1. Off-Farm Experience & Education

  • Successors should work away from the family farm to gain different experiences, skills, and mentorships.
  • Exposure to various aspects of the value chain and non-farm skills enhance successors’ readiness.
  • Formal education and joining professional networks also add to their skill set.

2. On-Farm Trial Period

  • Successors are hired as paid employees with clear expectations.
  • This period serves as a test for both seniors and successors to gauge compatibility, separating family and business dynamics.
  • Honest evaluations conclude this phase, determining if the successor progresses or exits the business.

3. Initial Management & Ownership

  • Successors manage specific farm functions or enterprises.
  • They should be given decision-making authority for these areas.
  • Begin the process of asset ownership, with consultation on transfer strategies.

4. Advanced Management & Ownership

  • Successors take full charge of a designated farm enterprise or function.
  • Complete financial management, including understanding costs, returns, and investments, is crucial.

5. Majority Management & Ownership

  • Successors hold the primary stake in the farm, making most business decisions.
  • Asset transfers, especially for larger farms, require careful consideration and consultation due to tax implications.
  • Clear transfer of assets assures the next generation of their future stake in the farm.

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