You are here

A farm divided

By Dr. Donald J. Jonovic


Our business was started by my maternal grandfather, and it passed on to my mother and father 20 years ago. My grandfather made five of his seven children investors by gifting them each a percentage of ownership. On top of that, he set up a trust fund for his grandchildren (me, for one), which hold a portion of the ownership as well.

Currently, of the 27 legal shareholders, four actively participate in the business. I returned to the farm to take my dad’s place so he could retire. But now he doesn’t have an actually budgeted plan for retiring. He feels he should be able to live off his ownership (as my grandfather does) for the years he worked this place.

My grandfather always has been the one who scrutinized the finances, often resulting in many arguments between him and my parents. Since my return, I have relieved him of much stress, and he often says he is almost carefree.

My main concern is that my father may not have the option to retire as comfortably as he wants. My second concern is if I have kids, they’ll be in a world of chaos because of too many taking their share of cake.

The first year I was back, I actually turned down someone interested in buying our farm. I love farming, and I love the idea of continuing the legacy. But I feel like I will always be in the service of my relatives. One day the business may go under simply because everyone will expect to live (retire) off the farm’s income.

Should I have accepted that buyer’s offer after all?


Is it really common sense to believe a growing farm exists to fill the financial needs of an expanding family?

You may remember the story of the king who wanted to reward an investor for his creation. The shrewd inventor asked for only one grain of wheat, doubled for each square on a chessboard. “So little?” the incredulous king exclaimed. Granting the “little” reward bankrupted his kingdom, as that one grain grew to the size of Mount Everest.

S.B.’s situation looks similar. His grandfather’s small needs were met. Now his dad is looking to the farm for his retirement, and S.B. sees the other owner-operators and 23 other shareholders in the wings, maybe expecting their needs to be met one day.

If we do the math, it’s mountain time.

As S.B. knows, the farm can’t bear that geometrically exploding burden of need. As an employee, S.B.’s dad’s retirement expectations have validity. But the lack of a plan to fund it may make it less than he expects – a price he may pay for his failure to plan.

As for the 23 off-farm owners, S.B. is worried about the wrong issue. The farm’s real challenge isn’t meeting the retirement needs of these off-farm owners, obviously unrealistic. It should be their legitimate expectations for return on investment.

A multi-owner farm must both pay the managers and provide an appropriate return to all owners. If it can’t do that, the alternatives are stark: Either on-farm owners buy out the off-farm shareholders, or if they can’t, the family accepts the outsider’s offer and sells.

S.B. should stop worrying about retirement expectations growing like grains on a chessboard and start thinking about how to meet those legitimate expectations for investors’ return.

Read more about

Talk in Farm Business

Most Recent Poll

I will cut expenses by reducing: