10 Steps to Family Farm Succession Planning - Part 1

A great deal of planning, preparation and communication is needed in order to for you to complete the Herculean task of transitioning your family business from one generation to the next.  From a 30,000 foot level view:

• The goals and aspirations of both generations need to be understood and communicated,
• The financial and organization health of the business needs to be assessed and
• A systematic and flexible plan for transitioning responsibility, management and ownership needs to be developed and implemented

1.  Determine Individual Goals, Objectives and Core Values
The need to identify and communicate everyone’s individual core values, goals, objectives, wants, needs, fears and hopes is the starting point.  There is no sense in moving forward with some grandiose plans for the next decade or so, when it is obvious that the senior generation wants to map out a plan heading “east” while the successor generation has dreams of taking the business “west”.  Without an understanding, appreciation and some shared concepts of the future, making a successful transition between generations become even more challenging than otherwise.  It takes some time and questioning to explore these areas of foundational importance to the succession planning of your family business. 

2.  Assessment of Current Financial Health
This important step answers the questions or how well the business is liquid, solvent, profitable and efficient and whether any changes might be needed if the family farm will be required to support additional families.  Without a detailed analysis, it makes it difficult to make such an assessment.  This may be one of the most important steps since it provides a basis for the feasibility of any transition plans and the financial requirements for success.  Additionally, full disclosure is important for the successor generation to understand the financial realities of the business.  

3.  Explore Current Relationships and Organizational Health
Understanding how the business structure and systems interact with the many personalities, behavioral traits, skills and tasks involved in family-owned businesses is important for continued success and generational transfer.  This step involves the exploration and assessment of communication and behavioral traits to help ensure everyone is talking in language that other people can understand, appreciate and react favorably to.  Organizational health needs to be matched with the financial health of the business to make a transition successful for everyone.

"It's the job that's never started that takes longest to finish."       

 - J. R. R. Tolkien

4.  Clarification of Roles, Responsibilities and Authority
People need to be placed in positions and roles in which they can thrive and positively contribute to your family business.  They also need a clear understanding of their role and how it contributes to the overall success (or failure) of the business, what they are specifically responsible for and who makes what decisions all provide clarity and helps remove doubts and misunderstandings within your business. 

5.   SWOT Analysis – Internal Strengths & Weaknesses and External Opportunities & Threats
Understanding and assessing internal and external factors that impact every business differently, will allow you to develop strategies to maximize resources toward fulfillment of a deliberately stated vision for your business.  Understanding the current skill sets of your team members and the skills needed for the future shows you where gaps may exist.  In turn, this understanding helps everyone envision a roadmap for the future and becomes the basis for personal development plans, training and management transition.  Mitigating risks and taking advantage of opportunities by maximizing resources helps you maintain a sustainable competitive advantage, but without spending time exploring these areas, the future plans may become clouded and unclear for your team.

To be continued next week...

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