Determining the roles people will play in the process is the first step.
Written for Milk Business Quarterly and originally published 4/30/24 on dairyherd.com
So, you’ve had the family meeting regarding transition planning and agree that you need to start the process. Now what?
Every situation is unique. We’ve done transition planning for twenty years and have developed a process that is flexible enough to allow for the unique needs of each family. For anyone who has run a dairy, processes come naturally. Milking, feeding, and reproduction all have detailed processes. This framework is just another process, with steps and defined outcomes at every stage.
Roles
Determining the roles people will play in the process is the first step. At a minimum, you’ll need a coordinator who can manage documents and calendars, prepare meeting agendas, and be the single point of contact for advisors and the families involved.
Values
It’s often assumed that everyone in the family has the same values. But, if there is conflict, the reason is often misaligned values. Here’s an example. Two brothers were transitioning into the dairy. One wanted to expand and take on more debt via an aggressive growth plan. Along with this came more work hours and debt. The other didn’t like as much debt or growth and wanted more time with his family. Who’s right? No one! At the core of this disagreement was values. Different values are only a problem when one person can’t get what’s important to them IF the other person gets what’s important to them.
Vision
This question isn’t, ‘Where ARE we going?’ It’s, ‘Where do we WANT to go?’ Where we want to go might differ slightly from the previous generation, and that’s OK. Foreseeing the future is impossible, so we like to help clients create a vision looking 3-5 years out. This is far enough to plan, execute, and get good results.
Strategy & Action
Strategy is making the vision a reality. Family, operations, and ownership all need to be addressed. The most successful plans start with the family component, then address operational changes, and finally, the ownership. At the ownership stage, accountants and attorneys typically get involved and put the finishing touches on asset transfers, trusts, sales, and tax planning.
Governance
As a family business matures, clear boundaries and expectations become critical in keeping the peace. This includes buy/sell and shareholder agreements. But it also addresses how family members join the farm, how compensation is determined, how family is expected to add value to the farm, and what standards of conduct are set.