Planning for the future:
WEST LAFAYETTE, Ind. — A solid succession plan ensures that a farm business can continue on.
“Factors Impacting Succession Planning” was recently released by Purdue experts Margaret Lippsmeyer, Michael Langemeier, James Mintert and Nathan Thompson.
“Without succession plans, the next generation is left in limbo, unsure of how to split the farm, and may be forced to sell because an agreement can’t be reached,” they reported.
“Guilt often overcomes those who would like to continue farming but are unable to follow in the footsteps of preceding generations. While an entitled mentality may drive other family members to make it difficult or impossible for the family farm business to continue operating.
“These disagreements can drive families apart, leaving all involved with soured opinions of relatives they have known their whole lives.”
Thankfully, creating a succession plan and reviewing it regularly can solve this problem.
A survey of 403 U.S. producers conducted in April sheds light on the impact of farm succession plans.
· Results indicate that farms with succession plans in place generally implement other good management practices more than farming operations without succession plans.
· Sixty-eight percent of farms with written succession plans use written lease agreements compared to 52% of farms without succession plans.
· Farms with succession plans tend to use financial ratios and standard operating procedures, evaluate crop pricing performance, operate larger farms and are more resilient to strategic risk and their operators are more highly educated.
· Overall, farms that employ better management practices tend to have greater implementation of succession plans.
· The survey results reveal that there is a strong correlation between farms that use recommended business management practices to operate their farms and having a written succession plan in place.
· The results also suggest that well-managed farms don’t wait until retirement age approaches to develop a written succession plan.
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