Letting go is difficult for any business owner, and it can be especially challenging for poultry farmers. You may not have enough time to step back from the demands of running your business to plan for retirement and prepare the next generation to take over your farm. These five steps can help make the transition process easier for you and your family members:
1. Know your goals
It can be difficult to imagine what retirement will look like after spending years tending to your farm. Identifying your goals, such as whether you would like to travel, can help you build a concrete picture of the future. It can also help you understand what financial considerations you need to address to achieve those goals.
2. Prepare the next generation
Many farmers plan to pass the farm to the next generation — and it is vital to communicate your goals, establish the roles of each family member, and set a timeline for the transition. Increase the responsibilities of the next generation as you work towards this timeline to help them gain new skills. Additionally, gradually increasing their involvement in the decision-making process can help give them the confidence they need to run the farm successfully.
3. Address financial considerations
You need to have enough funds to support your retirement. The next generation may choose to purchase the farm through a 20-year payment plan — or sell a piece of land to pay you a lump sum. Developing a financial roadmap can help you determine which option works best for your retirement goals without putting too much strain on the next generation or the farm.
4. Decide how you want to participate
You don’t need to let go of your farm completely if you transition it to a family member, and a succession plan can help establish how you continue to participate in the business. This may include your level of involvement in decision-making, how many hours per day you want to work, and your compensation for that work.
5. Seek outside advice
A third-party advisor can provide the strategies you need to support a smooth transition. Additionally, tools such as MNP’s TransitionSMART™ self-assessment tool can help you understand your current situation, where you are heading, and areas where you may need support. This helps ensure you address all considerations and transition your farm on your terms.
How a succession plan can help you achieve success
A poultry farmer and his wife were planning for retirement. They had two daughters: Emily, who worked on the farm, and Jane, who chose a different career. The farmer and his spouse assumed they would pass the farm equally to their daughters, but they never discussed the implications of this decision.
An MNP advisor interviewed each family member and discovered Emily wanted to take over the farm. However, she worried about how to navigate split ownership with Jane — who had different goals and ideas for the business. Emily never asked her parents for sole ownership because she didn’t know how to bring it up and knew she couldn’t afford to buy it.
The advisor helped the family understand the challenges of split ownership between active and inactive owners. They decided the sisters would jointly own land held outside the farm operation instead as an inheritance. The advisor helped establish parameters around how to use this land, how much money they can pull out, and what happens if one sister wants to sell the land.
Additionally, the advisor helped establish family business rules for ownership of the farm operations. They also created a financial roadmap to help Emily gradually purchase the farm while ensuring the farmer and his spouse would still have the funds they needed for a comfortable retirement.
These steps helped safeguard the relationship between the sisters, the farm, and their inheritance. The advisor also helped establish the farmer’s role after his retirement — where he initially worked four hours a day. However, he reduced the amount to an hour after he saw that Emily could run the farm successfully.
Clear communication and starting to plan for retirement earlier could have helped the farmer overcome many of these obstacles. However, he still achieved a successful outcome for each family member by working through the process with the support of an advisor.
For more information about how to take the next steps toward creating a succession plan, contact MNP’s Danielle Walsh, CPA, CA, at 613.558.6859 or danielle.walsh@mnp.ca
