Succession Planning

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Learn About Succession Planning

The American Soybean Association and eLegacyConnect are pleased to provide information about succession planning for farm families.

Succession Solutions for Farm Families

By Kevin Spafford

For an agribusiness owner, nothing is more precarious, or crucial, than transitioning the operation from one generation to the next. For most families, the farm represents a lifetime of work. It is a testament to effort, the source of pride, and the result of a lot of angst.

Following a defined process for succession will improve efficiencies and promote desired outcomes. I recommend a six-step process:

1. Family Meetings:  Meeting on a regular basis will keep everyone informed of pin-pointed goals, transition methods, decisions, and recommendations. Always convene in a neutral location, with a written agenda, and pre-established ground rules.

2. Discovery:  Discovery is the process of learning everything possible about you, your operation, and your succession intentions. It’s important that each interested party be allowed to speak freely and share their concerns in a safe environment.

3. Preliminary Plan:  Preliminary planning is often referred to as the ‘try-on’ phase in the succession planning process. Initial recommendations are made and the owner considers the ramifications of decisions relative to objectives.

4. Final Plan:  Your ‘final’ draft must remain dynamic. In the early stages of the process, you’ll implement changes to fortify the operation, ensure personal financial security, and start the transition to new owners. The meat of the final plan is an implementation schedule with actionable steps to your goals.

5. Implementation:  Implementation is the process of writing legal documents, creating financial instruments, adopting accounting practices, and learning leadership practices for a smooth transition.

6. Annual Review:  As you experience the planning process and learn more about the value of succession, you’re in a position to refine your goals and implement strategies to further improve efficiencies.  Your plan must adapt to the changing legislative landscape, business environment, societal structures, familial responsibilities, and growing capabilities of a new leader.

The keys to a successful transition are good communication, clear objectives, readiness, a planning model/process, and action. Your ultimate goal is an operation that will endow the family for generations to come.

As you begin the journey, this Series of Simple Decisions planning tool will help you settle on some specific goals for the farm, your family and the future.

Kevin Spafford is the founder of eLegacyConnect which provides succession solutions for farm families.

Members of the American Soybean Association receive a discount for full access to all that eLegacyConnect.com has to offer. CLICK HERE for details about the eLegacyConnect discounted subscription and other benefits of ASA membership.

Succession Planning - Whose Responsibility Is It?

By Kevin Spafford

Not mine, theirs or yours: three dissimilar ways of approaching the succession planning process. Which way do you see it?

An attitude of “not mine” implies that you assume or hope someone else will control the outcome. Are you sitting by, anticipating the succession planning outcome will align with your goals? If you are, is it any surprise when it doesn’t turn out in your favor? If it’s “not mine,” whose is it?

Is it “their” responsibility? If it is, you can’t affect the outcome. This approach makes you powerless and subject to the decisions of others. As a participant, you’ve basically released yourself of any responsibility and abandoned all control. If that’s the case, you can’t expect much and certainly shouldn’t be surprised when the outcome is not the result you would have chosen.

If you approach the succession planning process as “your” responsibility, you can make a difference. You control the agenda, affect the decisions and react to the actions of others from a position of strength. Owning a problem isn’t easy. That’s why only the strong survive and the weak move on. When it’s yours, you might not always win, but you’ll be stronger for the challenge and better prepared to succeed.

Each generation active in operation has a responsibility to prepare for the transition to a next generation.  The biggest challenge, and probably the most critical factor in succession, is developing well-prepared next generation leaders.  Each generation currently involved in the operation will play a role in development. The senior generation must model the actions and behaviors they want the next gen leaders to adopt. They must be open to discussing new ideas and sharing experiences that may prove to temper a ‘brilliant scheme.’

As the family begins the succession planning process, talk about all aspects of the transition. The first priority is a plan that enhances the integrity of the operation. The plan should not unduly burden the farm with owners who are not directly involved and dependent on the operation. The second is to ensure each active family’s financial security. Succession is about making things better and more certain. Finally, the plan should include preparing a next generation for leadership. A professional development plan may include education, experience and a growing network of professional resources.

So, rather than wonder whose responsibility it is, step forward and proclaim it’s yours. Then do whatever it takes to make sure a succession plan is written and diligently executed.

Kevin Spafford is the founder of eLegacyConnect which provides succession solutions for farm families.

Members of the American Soybean Association receive a discount for full access to all that eLegacyConnect.com has to offer. CLICK HERE for details about the eLegacyConnect discounted subscription and other benefits of ASA membership.

Retirement - The Choice is Yours

By Kevin Spafford

My dad used to say, “Be careful what you wish for, you’re likely to get it.”  A farm owner may spend years wishing for retirement but then, faced with the prospects of life without work, s/he wonders  about the future.  Many are not prepared for the consternation and the heartburn of indecision.

Take a few moments and ask yourself the following questions:

  1. How will I spend my time in retirement?
  1. As I prepare for retirement, how do I want to develop my business?
  1. Have you considered alternatives to complete retirement?
  1. Are my children, grandchildren, loyal employees and/or extended family interested in continuing to grow the business?
  1. Do I see a financially satisfying path to retirement?

The good news is retirements can last 20 to 30 years; the bad news is retirements can last 20 to 30 years.  The choice is yours.  You can prepare now for the kind of retirement you aspire to, or you can live by chance hoping, instead of planning, that your retirement will be long and fruitful.

If retirement is anywhere on your horizon, take a few moments now to get the thought process rolling!  A great place to start is Ready to Hang Up Your Spurs, a quick self-assessment, courtesy of  eLegacyConnect.  Though the future of business is fraught with many challenges, so is retirement. All too often people make hasty decisions based on unclear desires. Once  you’ve answered the questions posed,  you’ll  be able to view a brief summary of your results.

For much more on this topic, go to eLegacyConnect.com and search ‘retirement.’

Kevin Spafford is the founder of eLegacyConnect which provides succession solutions for farm families.

Members of the American Soybean Association receive a discount for full access to all that eLegacyConnect.com has to offer. CLICK HERE for details about the eLegacyConnect discounted subscription and other benefits of ASA membership.

New Year's Resolution Time

By Kevin Spafford

A New Year’s resolution is only as good as the commitment that supports it and the habits that change because of it.  With 2014 underway, now is a great time to start.

The planning process empowers business owners to strategize the next steps and create options for the future. A comprehensive succession solution should include:

Ownership Transition
In most cases, transferring ownership to a well-prepared next generation requires financial planning for retirement, a contingency plan for non-performance and a method for gradually turning over the reins. As an experienced owner, you should commit time to helping the next gen leader transition into a management role.

Financial Security
A comprehensive plan provides financial security for each ownership household dependent on the continuing success of the operation and/or the proceeds from the sale.  All too often business owners become tied to a transition that does not yield long-term positive results or may go sour due to a lack of factors that could have been avoided.

Leadership Development
Most next-generation leaders have a solid education and good experience.  A plan for developing leadership skills, including business management, team development, project coordination, business design and professional growth, is critical to operational growth and lasting success.

Estate Tax Provisions
An owner’s personal estate planning documents should parallel the provisions of the succession plan.  An estate tax plan must protect the integrity of the operation, plan for distributions, mitigate the estate tax liability, and ensure the family’s financial security.

Proper planning for succession puts the farm owner in the pilot’s seat, and maximizes control over both known and unknown situations.

Kevin Spafford is the founder of eLegacyConnect which provides succession solutions for farm families.

Members of the American Soybean Association receive a discount for full access to all that eLegacyConnect.com has to offer. CLICK HERE for details about the eLegacyConnect discounted subscription and other benefits of ASA membership.

10 Tips -- Legacy Minders for the Mental Game

By Kevin Spafford

Like any other game, sport or challenging endeavor, succession planning is more than physical techniques and drafted documents. Done properly, it’s a mental undertaking that will test even the most committed family business leader. The following list of Legacy Minders may help as you contemplate the mental game of planning for succession:

  1. It’s up to you to initiate the process. Exercise your responsibility as a leader and commit to engage in planning.
  2. Create a safe environment for others to express their ideas, thoughts and/or concerns.
  3. Listen to learn. Learning is the basis for all growth, and succession is largely a growing process for the owner, the family and the operation.
  4. Grow with your relationships. The necessary transition from parent/child to working colleague or from boss/subordinate to mentor/protégé is a full time effort.
  5. Lead by example. Model the behaviors you hope to teach the next generation.
  6. Don’t impose preconceived ideas on others. Our best intentions are not always welcome and/or correct. People will respond appropriately, when given the chance.
  7. Follow a defined succession planning model and process. Using proven methods and trusted techniques is the most efficient way to achieve your goals.
  8. Confront conflict. Don’t allow the possibility of dissent to hinder your progress. Most of the things people worry about never come to pass.
  9. Employ formal business structures and tools. The right systems encourage objectivity and eliminate subjective decisions.
  10. Mentor someone not related to you. Mentoring is an exercise in both teaching and learning. It’s an excellent opportunity to practice good communication skills, share life experiences and learn from a younger generation.

Kevin Spafford is the founder of eLegacyConnect which provides succession solutions for farm families.

Members of the American Soybean Association receive a discount for full access to all that eLegacyConnect.com has to offer. CLICK HERE for details about the eLegacyConnect discounted subscription and other benefits of ASA membership.

Key Employees are Critical to Success

By Kevin Spafford

Too many agribusiness owners give too much credit to material asset value, plant, property, intellect, etc., and too little value to people and processes. What if you could apply an appraised value to people? What value do your loyal employees bring? And, how much intellect do they bring to the work place that is a part of your culture and a key to business success?

Absent the commitment of loyal employees, a business may not survive succession. Whether left in the hands of a well-prepared next generation or sold to a willing third-party, unless there are capable employees to carry-on, the business simply will not make it beyond transition. The probability of survival may be slim if, when the owner departs, key employees leave instead of adapting to a new management structure.

An ownership transition can be disruptive and cause key employees to question their continued security in the business. Key employees may be reluctant to work with and mentor a successor who is not ready to take immediate control, especially given that the family member may supplant the key employee and take the position.

There are numerous options for rewarding a key employee’s commitment, loyalty and hard work. The most effective incentives are usually monetarily based. An owner may offer some form of nonqualified plan so the incentive may be tailored specifically to a particular situation.

Nonmonetary items should be considered. Flex time or part-time employment may motivate an employee who wants to spend more time with family, pursue personal goals or start an entrepreneurial venture. Other incentives may include job advancement and/or professional enrichment programs.

In designing the business succession plan, it is important to identify all employees who are critical to the continuing success of the business. Once key employees are identified, specific strategies for their retention can be formulated. Some key employees may desire equity ownership in the company, while others may be motivated by more immediate income or additional compensation at retirement.

Job enrichment may include expanding an employee’s responsibilities, assigning new projects, or enhancing the employee’s decision-making authority in the organization. An owner’s commitment to enrich an employee’s job as part of the succession planning process related to ownership transition can provide a key employee with incentives to stay, while making a positive contribution to that transition.

For much more on this topic, login to eLegacyConnect.com and search ‘key employees.’

Kevin Spafford is the founder of eLegacyConnect which provides succession solutions for farm families.

Members of the American Soybean Association receive a discount for full access to all that eLegacyConnect.com has to offer. CLICK HERE for details about the eLegacyConnect discounted subscription and other benefits of ASA membership.