Succession Planning Tips for Your Farm When There is No Succession
While attending a succession planning seminar last year, my co-workers and I were surprised when a young man stood up and said, “What if the current leadership [i.e., his father] doesn’t want to get out of the way?” In a group discussion afterward, we commented how lucky that owner was to have someone waiting in the wings wanting to take it over— even though it was clearly a frustrating situation for the son and could be disastrous for his father. The topic quickly changed to: what about family-owned businesses — a hallmark of farmers and the horticultural industry — that do not have a next generation to take over?
If there is no family to take the reins of your operation, then the logical choices are to transition the business to new leadership and/or your employees, sell the business and/or the land outright, or simply close shop when you’re ready to retire.
According to the PricewaterhouseCoopers Family Business Survey, 48% of business owners either don’t know how to or haven’t even thought of preparing for the sale of their company. What is clear is that the best business transitions begin early and have a team of people working in tandem to maximize the value of the business and get it ready for transition.
“By failing to prepare, you are preparing to fail.” ~Benjamin Franklin
The numbers are staggering.
10,000 baby boomers hit retirement age every day and more than 60% of all business owners are older than 55. According to recent surveys by the Exit Planning Institute, PNC Bank and Kent State, 80% of business owners have no transition plan, or have not documented or communicated a succession plan.
Furthermore, 80% of these businesses are simply not saleable, nor do they have a proper talent or family pipeline to continue. Of the remaining 20% that are sold, 12% will be lower than the original asking price.
The study also discovered that 40% of business owners did not have a plan that covers their forced exit (death, disability, divorce, or illness).
Even though 98% of business owners feel that succession planning is important, they rarely have a plan in place. When they do have a plan, there are several reasons why they don’t succeed:
- Many think it is not important and choose to focus solely on the transition rather than the transactional nature of a business.
- Potential leaders and family leave the company looking for other opportunities. Owners simply do not adhere to the plan, and many continue to stay long past their expected date of departure, as illustrated by the frustrated son at the seminar.
- New leaders are ill-prepared to take over or simply do not perform to the level of the original owner.
- A focus on the past or a mindset fixed on, “this is the way it has always been done,” which not only cripples future leadership, it puts the entire future of the business in jeopardy.
- Politics, time, lack of commitment, and fear.