A staggering 90 percent of American businesses are family-owned or -controlled, according to U.S. Bureau of Census.* And, to the agribusiness readers of this blog, it will come as no surprise that the country’s first family-owned businesses were farms, and in some regions of the country, farms remain the majority of local, family-owned businesses.
Family farming is the backbone of our great country, and I’m a staunch believer in keeping the family farm in the family – with this caveat: the next generation must be willing and prepared to step up, and the previous generation must be ready to ease aside.
Over the years, I’ve personally completed two transitions of leadership in my own family business (to me and then to my son), and I’ve observed with great interest the successions of other agribusinesses. It is from these experiences that I offer these five considerations for transitioning a family business down the line:
#1: It’s Not Inherited
Regardless if the next generation inherits the family business or buys it, what may not come naturally is business and leadership acumen. These are learned skills that one must desire to develop. I’ve said it this way before, quite frankly: The entrepreneur gene is not necessarily inherited.
As owners, we must integrate the next generation into the business from pillar to post. Allow them to learn their way around the business, from the simplest of tasks working their way up to leadership roles. Immerse them in all aspects of the business, mentor them in best practices, allow them to stretch their wings and empower them to build employees’ confidence in their abilities.
#2: It’s an Opportunity, Not an Obligation
For the leader of a family business to presume that the next generation can or wants to take over is unfair. As owners, we must acknowledge the fine line between opportunity and obligation when it comes time to hand over the reins.
As a young man, I saw joining the family business as my obligation. That perspective can breed resentment between generations. What I later realized was the opportunity. It is incumbent on the current generation to encourage the next generation to work elsewhere, to be out in the world, and then to come back to the family business with added value, fresh perspective and advanced skills. We must balance their sense of duty with a genuine desire to take over and lead.
#3 It’s About Communication
Communication within the family about expectations and plans is key to a successful generational transfer. Be proactive in communicating with multiple siblings and other close relatives – especially those with a financial stake – about succession plans, financials, roles, timelines, etc. Talk about it together, come to a consensus and write it down. Unresolved conflicts at any stage of the succession can harm the business’s bottom line and the family’s dynamic.
Communication must also be extended to the employees. You are obligated to be clear with non-family executives and employees about the plan of succession and how that transition will occur.
#4 It’s About Mentorship
As the second generation in my family’s business, my father – the first generation – was my greatest mentor, but he wasn’t my only mentor. As I learned the business and moved up the ladder, I leaned on other mentors who taught me to be careful, concise and accurate, among other business skills. They also taught me be about customer relations, employee communication and salesmanship.
We are obligated to do the same for those coming up after us. Our sons and daughters need our guidance and leadership, and we need to be intuitive enough to know when to step aside. If we’ve prepared them well, allowing them to lead without us will be our greatest accomplishment.
#5 It’s Easier with Consultants
Outside consultants are absolutely necessary in the transition process, for tax and legal concerns related to ownership, finances, insurance, etc. It can be difficult passing wealth to the next generation, and all generations must be comfortable with the financial and legal decisions being implemented, as well as the long-term strategic plans for change and growth.
We don’t have to – and shouldn’t – go it alone. The executive resources at Finding Black Ink have the career experiences needed to aid agribusiness owners with generational transitions. The core philosophies that guide Finding Black Ink’s experts align with the factors today’s business owners consider daily: objectivity, creativity, integrity, collaboration and market understanding. With Finding Black Ink, you’ll find a fresh and beneficial perspective on achieving your family’s business priorities.
Want Paul’s insights into smoother transitions to the next generation? Reach him here.
* https://www.inc.com/encyclopedia/family-owned-businesses.html, accessed June 8, 2018.
About Paul Bratney
Paul Bratney is a second-generation family agribusiness owner and has eased into semi-retirement so that the third generation can step up. His father, Ken, started the family business, Bratney Companies, in 1964; Paul joined the business in 1977. By 1989, he was president and CEO of Bratney Companies. Since 2014, when his son took over, Paul has served as chairman of the board.
A U.S. Marine and a professional civil engineer, Paul has worked around the globe building state-of-the-art seed-conditioning facilities and food and beverage manufacturing facilities. He’s led projects from needs assessment through conceptual design, permit acquisition, construction contract negotiations, construction, start-up and hand over with owners, insurance companies, buyers and sellers on three continents. Paul has extensive knowledge in the ag industry, having worked in corn, soybean, wheat, oats, rice and barley, as well as popcorn, malt barley, hops, tree nuts, edible beans, ag food snacks, and more.