The Three C’s of Succession Planning
I taped a podcast yesterday with Dave Specht who is the director of Global Family Business Institute at The Drucker School of Management and perhaps more importantly lives in Basin City, Washington (I will let you look it up on a map).
During that podcast (which will be available in the next week or so), we discussed what makes a good family farm transition and he mentioned the three C’s that are needed as follows:
- Contingency planning – Has the family determined what would happen if suddenly you were killed in a car wreck. Would the next generation be ready to immediately step in and take over and perhaps even do a better job.
- Cash flow planning – Have you developed a plan that shows how much cash flow you would have in retirement and even more importantly how much cash flow the farm generates and that the next generation understand how this cash flow is derived and what goes into making it.
- Communication planning – Have you communicated your plans to the next generation including any of those “in-laws”. If you only communicate your plans to your kids, they will then communicate your plans to their spouse. Will it have the same impact? Also, have you introduced your kids to those important contacts you have such as input dealers, CPAs, attorneys, insurance agents, etc.
As you can see, these three Cs are very important and a successful family farm transition has likely succeeded in all three. It is difficult to achieve a good farm transition without at least doing well in each of these “C”s.
The podcast with Dave will be out soon and I strongly recommend listening to it.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
Thanks for the opportunity Paul. If anyone wants more information about The Farm Whisperer, here’s a link to the book. https://www.amazon.com/Farm-Whisperer-Preserving-Families-Perpetuating/dp/0996597905