Family Business Matters       09/03 05:00

   Farm Succession Scars

   While passing the family business to the next generation can be positive, 
what often is ignored are the negative traits and tendencies that we pass along.

Lance Woodbury
DTN Farm Business Adviser

   Most of what we hear or read about passing the family business to the next 
generation is positive. Farm- or ranchland, financial assets, life lessons and 
family values are the primary assets we hope to transition to others. Indeed, 
significant time and money are invested in making sure things of value pass 
with as little tax or family friction as possible.

   But what often is ignored are the negative traits and tendencies that we 
pass along to the next generation. We may leave financial liabilities or 
unfulfilled promises. We might also leave unresolved conflicts, patterns of 
abuse or addiction, or a history of fighting for control over day-to-day 
operations. As you plan for succession, try not to leave scars in the following 
areas.

   UNFULFILLED PROMISES

   Family businesses transitioning from one generation to the next are full of 
promise. There is often a promise to not sell land and keep the business 
intact. Sometimes, there's a promise to come home to the business after 
college. The senior generation also may make a promise to compensate the 
younger generation tomorrow for low wages paid today. We make promises to gift 
the business or certain assets to the next generation. And, many times there's 
a promise, implicit in most families, to take care of other family members 
regardless of their behavior.

   When any of those promises go unmet, people can feel hurt. They may or may 
not say it, but the pain exists. That pain, then, might be shared with a spouse 
or even the next generation, creating a transition scar for future generations. 
Plans change, and promises may need to change, too. Discuss those changes 
sooner rather than later.

   UNMADE PLANS

   Succession planning involves transitioning both what you do (your work) and 
what you own (your assets). Like a baton relay at a track meet, the handoff 
takes both planning and skill. If you don't plan for the financial handoff, the 
income and estate tax liabilities will significantly impair the business. If 
you simply give the business or land assets equally to the next generation 
regardless of involvement and without rules for buying and selling between 
them, you've likely set up a difficult exit or insurmountable buyout.

   When it comes to your role in the business, if you haven't taught, trained 
or shared your skills and experiences with the next generation, it may repeat 
some of the costly mistakes you made during your farming or ranching career. 
And, if you don't discuss the timing of the transition, leaving people to 
assume when the handoff will occur, the baton might get dropped, or the next 
generation may simply quit the race right before the senior generation is ready 
to hand off.

   UNRESOLVED ANGER

   Succession is not just physical and financial, it is also emotional. 
Thinking about your transition requires considering your mortality, forcing you 
to reckon with your own goals, accomplishments and relationships. It means 
letting others do the things you love to do, and they may not do it quite as 
well. It speaks to your identity: Do you have a life apart from the business? 
And, it means watching the next generation work and manage things differently 
than you do. All of that can generate a fair amount of anger, which rears its 
head in the succession process.

   In more than 25 years of family business consulting, I've never seen a 
perfect transition. There are always some scars. But, how deep those scars run 
is within your control as a family. Conversations about promises and plans are 
the liniment, which may sting a little when applied but ultimately helps heal.

   **

   Write Lance Woodbury at Family Business Matters, 2204 Lakeshore Dr., Suite 
415, Birmingham, AL 35209, or email lance.woodbury@kcoe.com.




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