Keeping the farm in the family — without farming

How can a farm stay in the family over generations when some owners have no interest in farming?

Dr. Donald J. Jonovic

Family Business Management Services W.Q., From The Web: We are successful, third-generation rice growers with 3,500 acres of improved land. Until recently, all the owners worked on the farm, so ownership transition wasn’t much of a problem. Now, some of our fourth generation are looking outside the farm for careers. They all love the farm. All eight of them grew up here, but farming isn’t in their blood like it is with my two cousins, my brother, and I. Recently we were talking about planning ownership in the future. The more we talked, the more depressed we got. Three in the next generation want to farm, each from a different family. None of my children is interested. My partners thought I could just sell to them when I retire and it would be fixed. But that got me thinking. I told them I had too much respect for what Granddad, my father, and my uncle did to build this farm to want to sell out. I see a lot of potential for agriculture, especially rice here in the Delta, and I don’t want my family to give up the future growth and profit. But most important, I want my grandchildren to have an option to farm, something they’d lose if I sold. We’re stuck. Do we have options? Dr. Jonovic: Keeping a farm in the family over many generations is a dream shared by most families who own ag operations. But as W.Q. has found out, there’s a gap between the dream and reality. The challenge begins with the first heir who decides not to be a farmer. And the greater the number of heirs in a generation, the greater the probability that some will not want to farm. This brings up two hard truths: Forcing on- and off-farm heirs to be partners solely to keep the farm in the family has destroyed many families and almost as many farms. Expecting the farming heirs to buy out the defectors, generation after generation, drains precious capital out of a business that needs all it has. These realities don’t mean we have to give up the dream. But they have implications for planning to achieve it. There really is no good reason to keep a multiowner family farm over the generations unless it meets two goals. Goal 1: The farm must provide a superior return on investment in a form that is attractive to the owners and consistent with the family’s values. This doesn’t have to mean significant wealth growth. A family can accept average financial returns in favor of other values, as long as they’re agreed on by all owners. This is where W.Q.’s generation must start their assessment and planning if they are going to move to on- and off-farm ownership. Goal 2: The farm must positively promote on-going family unity. This can happen in many ways such as in a shared pride in family reputation, in regular meetings of owners (where defining the roles of off-farm owners is key), through creation and review of owner mission and vision, and with establishment of traditions like annual harvest weekends. But these will only happen if they are made to happen. W.Q. does have options, but the interaction of these return/unity goals requires careful balancing. Family involvement must be part of the overall plan, yet separating management authority from long-term owner oversight is critical. A family farm is a fine goal, but it’s far from easy to achieve.