Walk into almost any farm kitchen, sit in on a lender’s annual review, or attend a commodity meeting, and one topic is quietly looming in the background. That topic, estate and transition management, consistently ranks among the top three challenges facing the agriculture industry, both domestically and globally. The story of a neighbor in his mid-60s who is found dead on the kitchen floor after spending a day at the local cooperative, machinery dealership, and bank often sparks discussions within families and their communities.

Some seek a quick fix, thinking, “We need to go to a lawyer or accountant to draw up a plan.” Others continue to procrastinate or shift their focus to urgent daily business decisions, living with the hope and prayer that this too shall pass.

The issue becomes more complex as nonfarm family members move away, causing the legacy to become detached and fade over time. In other cases, family members who remain to carry on the legacy across multiple generations are challenged by thin profit margins, increasing complexity, market uncertainty, and the difficulty of purchasing inflated assets, particularly land. This places financial, mental, and physical stress on them, their spouses, and their children, often quietly eroding the very foundation the prior generation worked so hard to build.

Adding to this complexity, over twenty percent of farm and ranch businesses have no next generation of ownership. As a result, linking with aspiring business partners to carry on the legacy can bring hope, but it also introduces another degree of anxiety.

Despite this backdrop, planning for transition is not an option but a requirement, as life cycles are inevitable. The question worth asking is this: What are some practical tips to take the business to the next level at this fork in the road, rather than going down the low road that hinders business, family, and personal success? Here are ten practical areas to address as you begin the process.

Beyond the Balance Sheet

Estate planning often revolves around the transfer of assets and equity in both business and personal holdings. However, the more complex and often overlooked component is the transition of management and decision-making. A key sticking point for the senior generation is giving up control and the sense of purpose that comes from a lifetime of tough decisions, hard work, and sacrifice that have provided a living and built net worth on the balance sheet.

There is a time-honored principle that, to maintain control and achieve true growth, one must first give up daily tasks and delegate both control and decision-making to those being developed.

Sooner Rather Than Later

A common struggle among the junior generation is preparing to make critical decisions before it is too late. Some may need to work away from the family business for a couple of years to build skill sets and develop accountability for decision-making.

A growing trend in agricultural businesses is the use of apprenticeships. In this model, the next generation is given room to carve out their own enterprises or niches, develop planning and operating budgets, and be held accountable for their success. Financing may come not from the “bank of the family,” but from a traditional lender, thus requiring greater discipline and accountability, while also building confidence in decision-making.

The bottom line is that management and decision-making responsibilities must begin within two to three years of starting to work in the business for those who aspire to be the next generation. Otherwise, they may fall into the trap of becoming a hired employee for life.

Goal Setting

Goal setting by all stakeholders in the process provides focus and improves communication. Business, family, and personal goals across all generations are imperative in determining common ground and negotiating differences. A critical component of goal setting is putting goals in writing so that progress and trends can be used as reference points throughout the process.

Business Profitability

Is the business profitable? Do not use income tax records, as they are designed to show limited profits or losses to minimize income taxes. Work with your banker to develop an accrual-adjusted profit picture to determine whether the business is viable for growth and investment, and to understand how much outside or nonfarm income may be needed.

Business Assets

A third-party assessment of the value of business assets is critical to bring objectivity, rather than emotion, to the balance sheet. A “kiss of death” occurs when the next generation takes over a business with assets that are rusted out, worn out, faded, or obsolete, resulting in an operation that lacks competitiveness. The capital investment required for upgrades often strains future cash flow and profitability.

Planning for the Retiring Generation

An assessment of the senior generation’s income needs is critical. Social Security analysis and retirement accounts, along with the sale or lease of business assets, should be clearly outlined. A general rule is that fifty percent of the retiring generation’s income should come from sources outside the sale or lease of business assets to provide flexibility for all generations and stakeholders.

The Conversations that Cannot Wait

Does the senior generation have a long-term healthcare plan? Have they developed a basic will with final directives in a file that is accessible to individuals responsible for that oversight?

Living Arrangements

An often-overlooked component in the transition process is living arrangements and housing during the retirement years. More individuals are choosing to live in town, closer to healthcare and senior activities, and returning to the farm for their involvement as their schedule allows.

Building Your Transition Team

Do you have a transition management team in place? Ideally, this includes an agriculture-oriented lawyer, accountant, and a banker or financial specialist. A coach or facilitator is also recommended to help organize the process and ensure it continues in a timely manner.

Meetings should be held away from the business, limited to no more than half a day, with a clear agenda and recorded minutes. Attendance by all experts and stakeholders is necessary to ensure efficiency in the process and foster effective communication.

Investment Not a Cost

One must think of the transition process as an investment of time and money. Expect it to require up to one hundred hours, with a monetary investment of approximately one percent of the business’s asset value.

Finally, procrastination often leads to disruption in both the business operations and family harmony. One of the greatest legacies is often not monetary, but rather the impact made on people’s lives. Taking a proactive approach not only protects what has been built, but ensures that the people and relationships at the heart of the operation carry that legacy forward with purpose and pride.