Planning for the future of the family farm is a challenge for most farmers. However, the time to do the planning is not on the way to the funeral home, stated Jolene Brown bluntly. Brown, founder and owner of the Iowa family business consulting firm, "The Positives of Passing it On!" conducted a daylong workshop last Tuesday in cooperation with Purdue Extension in Winona Lake.
For over 30 years, Brown has been advising both farm and business families how to manage assets and pass on those assets to the next generation. The responsibility of the asset holders is to have all roles clearly defined as well a plan for the transfer of assets in the event of a death or divorce. Although the audience was composed of mostly farmers and their families, there were a few other family business owners who were in the audience.
Brown practices what she preaches. Brown and her husband, Keith, have two daughters who have no interest in farming. Keith and Jolene have a legally executed will that states how their farm will be handled upon their deaths. The Browns have observed neighboring farmers for the requisite "fire in their belly" for farming. From these observations, Keith and Jolene have chosen certain farmers who will be given the opportunity to buy the farm when their heirs are ready to sell. However, their daughters are not to sell immediately but have been instructed to wait two years before they make the final decision. Browns' children will know how to handle their legacy because their parents were very clear in their final wishes, said Brown.
Not everyone who calls Brown for help is accepted as a client. She first determines what the issues are in the family business and if she can be of service. Conflict does not scare Brown.
"I love it when you all are mad. I want everybody mad. You know why, only the discontented will change. And if the asset owners are happy, then I'm not coming," said Brown.
Brown likened the minor disagreements to mosquito bites. One or two bites are not a big deal, but issues such as a family member not showing up on time or failing to perform an assigned chore repeatedly start to add up. Over time, the resentments build and then there are fights on the way to the funeral home. Family members quit speaking to each other and relationships are dead. Instead, asset holders must take care of things when times are good and have the tools in place for the family when times get tough, said Brown.
The owners of the business or farm must be accountable and decide if they are a "family first" business or a "business first" family business." "Family first" farms are more like a hobby, stated Brown. "Business first" family farms make an intentional choice to operate like a business. Farms should have a CEO, mission statement, employees, clearly defined job descriptions, employee exit strategies, a method for resolving conflicts, business meetings and most importantly, everything should be in writing, added Brown. Family members should not assume that their position in the business is their birthright.
Ownership in the future of the family business, or farm should be dependent on several factors, according to Brown. The first is the family member should have some financial investment in the farm or business, or "skin in the game." Next, she recommends that the incoming person should bring personal value to the farm such as a two-year degree in a farm-related field as well as spending a couple of years working off the farm for someone else.
Finally, the member should also agree with the established policies of the farm, have a positive public image and a passion for farming.
In turn, the leader of the farm should plainly communicate his/her expectations and job requirements to the family member who wishes to join the operation, said Brown.
To keep communications clear on the Brown farm, a list of farm topics is laminated and on the refrigerator door. In farm meetings, only the circled topics of concern are talked about so participants stay focused, said Brown.
Another tool the Browns use is a management chart. Each person is listed in a column at the top of the chart with a description of tasks on the left side of
the chart. Either a person is responsible, consulted, does the work or simply informed about the task at hand.
Keeping accurate records is essential to running a family business or farm. Often farms are either incorporated or operated as an LLC. In order to comply with state laws, an annual meeting must occur and the minutes recorded and filed with the state.
Another tool for the family is an advisory group, said Brown. She moderated a panel consisting of Chad Miner a lawyer; Ben Romine, a CPA; and Nelson Schoon, a financial advisor, for a question and answer session. Brown urged every farm or business to retain a group of key advisors to assist with business decisions and estate planning.
Finally, Brown stressed that the time to estate plan is now. Hope is not a good business strategy.
"People in family businesses lie. Here are the three biggest lies. 'Work hard and someday this will all be yours. I am going to retire. You don't have to worry about your brothers and sisters. They all have their jobs and they are not interested in the business.' That's true until you're dead and then they are all interested in the business," said Brown.
For these reasons, all plans should be legally executed and contain management and ownership transfer intentions and buy/sell agreements.
During her presentations, Brown gave numerous examples of both good and bad succession planning. In one case she cited, the son had farmed both his farm and the father's land in exchange for using the father's equipment. There was no written agreement. Upon the father's death, the son's siblings demanded the son repay the estate for the use of the equipment. They went to court and the siblings won.
"Don't let others benefit from your hard work. If it is not in writing, it doesn't exist," said Brown.
One family who is taking Brown's advice to heart is the Brian and Pam Romine family. The family farms 1,800 acres of corn and soybeans around Mentone. Their son, Brice, also farms with them. For Brice, the workshop was a wakeup call.
"I understand now why I need more 'skin in the game.' I shouldn't expect things to be handed to me," Brice said.
The Romine parents plan to implement an organization chart and have farm meetings as well as re-evaluate their estate plan to account for their non-farming daughter.
Brown ended the day by requiring every person share with their tablemates the one action they will accomplish as a result of the workshop. She reminded the participants that making a decision is not the action. The action is completing the task.