Planning for 3 partners, 7 successors
By Dr. Donald J. Jonovic
THE PROBLEM: How can three partners with seven successors get the needed advice to help with the transition?
Problem submitted by V.B., Iowa
My two brothers and I are all in our 60s. We've put together a large grain operation. We also have hardworking sons (I have three; my brothers each have two), who will take over.
We can farm thousands of acres, but the problem is we don't have a clue how to begin the process of transferring this business and all these assets to our children. (My brothers also each have daughters who live in other parts of the country.)
Our accountant and attorney have been helpful over the years, but mostly with business and tax problems. They rarely call us with suggestions or ideas, and actually they seem to avoid our questions about planning transition to the boys.
In our 50s, we always thought there was time. Now in our 60s, the future's not so far away anymore. How and where do we start?
Dr. Jonovic's Solution
Lawyers and accountants are key players in the farm transition process, but these advisers are only part of that team.
Families who farm together seldom qualify for the Communication Olympics. For many, conversations about the future are about as common as armadillos in the Arctic. Even successful partnerships are burdened with confusion, tensions, misunderstandings, and resentments. Goals are unclear and often conflict.
Building a transition bridge from A to B is difficult if there's only hazy agreement on the starting point and little, if any, agreement on the end point.
Legal and accounting advisers can design and build the bridge, but first they have to know important variables like the starting point (people, assets, cash flow, organization), the end point (retirement dates, growth plans, objectives for off-farm heirs), and what the structure will have to bear (capital needs, financing, compensation).
These are the kinds of family and business questions legal and accounting training don't prepare such advisers to answer for their clients. For that, a hybrid approach is almost always best.
Over the past few decades, specialists have evolved who focus on helping families and partners unclog communication and wend through the predecisions. Their approach can demonstrate to V.B. and others how to work with all advisers effectively.
Typically, transition specialists begin with a deep dive into the fundamentals of both family and business. They review the organization, the P&L, and balance sheet. There are interviews with each family member and key employee to uncover patterns of shared and competing goals, points of conflict, strengths, and weaknesses.