The saga of the young farmer and rancher continues as transition in the agriculture industry is in full bloom. While there is no surefire way to get started, there are some common threats, whether starting from scratch or entering a family business. Let’s examine some of the threats and pitfalls that frequently arise.
In a family business, often the older generation will not communicate and fails to put in place a path of transition. They often think that forming a legal business entity, such as a corporation, LLC, or partnership, will solve all the transition issues. Yes, formal business arrangements are necessary, but other factors may need to be considered first.
“This will be yours someday!” How often have we heard those famous words, particularly in agriculture? The threat here is closed communication assuming that the younger generation, after years of work and management, assume that the business will become theirs. This could be a major challenge if a portion of the business must be purchased from siblings at an appreciated price. Red-hot land values that have the potential to make off-farm siblings instant millionaires are a black swan in family dynamics. A will and estate plan with clarity and transparency is necessary in a family business.
Now, what about the individual starting from scratch? In today’s world with high asset prices in agriculture, encumbering resources and start-up capital is even more of a challenge. With over 20% of U.S. producers without a family member to carry on the business, networking with this segment could be critical for the startup focus. I often remind the older generation of producers that more than likely someone assisted them in getting started, so perhaps they could leave a legacy by doing the same for another young and beginning farmer.
A good course of action for start-up is to develop a business plan to market your vision to individuals, lenders, and others who can assist you. This strategy is often used in the business world and it can be applied to agriculture, as well.