For most, retirement is an exciting milestone that means it’s time to reap the fruits of a lifetime of labour and settle into a more relaxed pace: travel, spend more time with the grandkids, finish that boat project that’s been sitting in the barn for decades.
But for many farmers, the process of winding down what has been built over generations and passing it on to the next can feel incredibly daunting. What if the kids don’t want to take on the farm? What if they want to sell or split up the business, or disagree over who’s the best placed to take over?
There’s really only one way for farmers to avoid the potential agony of succession, and that’s getting ahead of it before it becomes a crisis, according to Terry Betker, president and founder of Backswath Management, a farm-specific consultant based out of Winnipeg. Backswath has offered a wide array of services, including bookkeeping, growth management and transition planning tailored to the agriculture industry since 1992.
Planning proactively and setting goals can rest assured that a business remains in good hands with the next generation, Backswath told The Times.
“It’s not a discussion of if—it’s when, and how do you want it to happen,” Betker said. “I can say this, if the family is proactive in their approach throughout transition, there’s a way greater likelihood of successful outcomes. You can never guarantee anything, but it’s way higher than if they don’t try to put these plans in place.”
Transition planning is the building of arrangements prior to retirement. It can determine who inherits what, who takes on new responsibilities and when changes will happen. Although farmers can be hesitant to part with the business they’ve built and lifestyle they’ve led, time and age don’t necessarily leave much room for choice in the matter.
During impactful decision-making, it’s easy to get caught in the weeds or left unclear on which direction to take. Betker advises keeping important things, such as goals for the farm itself, in mind. Talking about where the stakeholders would like to see the business go in the years to come can help to form unified objectives to work towards.
“If there’s no clarity on what mom and dad’s goals are for the next five years, or what the children and the in-laws’ goals are, then there’s opportunity for there to be misalignment on what everybody’s working towards,” he said.
When the discussion becomes an argument that circles round and round, or is put off far too long, Betker believes bringing in an advisor can help frame the situation.
“I think it’s best if families can do it by themselves, but typically farmers struggle with doing it on their own because it’s too easy to put off. ‘We’ll do it next month or we’ll do it in July.’ Well, July comes around, and it gets pushed off again. Having a third-party advisor, someone else to talk to and hold them accountable, doesn’t cost a lot of money, but it is highly effective.”
A group may be willing to sit down and discuss plans for the future, but decisions are sure to be met with backlash if fairness for those who have contributed “sweat equity” along the way—the unpaid labour or non-financial contributions that help a business build value. For example, family members often work the field or tend to livestock without seeing a dime of direct profit. It’s a normal part of a generational business, but it needs to be recognized.
“Sweat equity, what’s fair and what’s equal are really important factors to include in the discussion about transition,” Betker said. “If one of the children has worked on the farm for a long time and not really ever been compensated for those sweat equity pieces can be really problematic at times.”
As important as it is to recognize those who have meaningfully contributed, those who are retiring and moving on also need to consider their own needs, something that can often get lost in the shuffle, Betker said.
“If you’re 65 or 70 years old and coming to the time where you’re not going to farm anymore, you don’t have a do-over, so you need to look at yourself first,” Betker said. “There is no right or wrong around fair and equal, it’s what the mom and dad think.”
These types of changes can come with complaints and arguments—some of which may be valid if what’s fair hasn’t been considered—but in the end, it is up to the owner, not their beneficiaries, to decide how things are divided and what the next move forward is. But that doesn’t mean the next move forward needs to be hastily planned at the cusp of retirement.
“Parents get to decide,” Betker said. “I’m not suggesting that they don’t contemplate how their decision is going to impact their children—it’s just for them to decide.”
