There is tremendous opportunity in production agriculture for young people. We often see great success stories from clients in their 20s who make more than $100,000 a year farming. And they weren't given everything on a silver platter. In most cases, it's quite the contrary.
One example is a grower who farms 300 acres with a small amount of machinery and hires most of it done. He also uses excellent risk management on the 2,000-head feedlot he manages. Earning $50/acre per head net profit will allow him to reach his return on assets (ROA) and return on equity (ROE) goals.
On the other hand, I hear things like: “I have no life. I'm burned out and exhausted. No one really values or appreciates me. I can't change things.”
These are the voices of young people involved in family operations. These are the voices of moms and dads in family operations.
We can only appreciate and take advantage of the tremendous opportunities in production agriculture if we plan for the future. This involves transition planning. It doesn't have to be difficult.
The transitions I've helped with begin with a few simple steps you can take before you ever get to a CPA or lawyer to draw up formal plans.
Most think transition planning is needed when mom and dad look at retirement, want to slow down a bit or if someone else is exiting or entering an operation. This is not the case.
If anyone in the farming operation feels uncomfortable with how they're being treated with respect to their family, time, money, equipment, facilities or property, this is a good indication that you need transition planning.
Transition plans shouldn't be something that's completed and then put on a shelf for five or 10 years, or until parents die.
Good transition planning should involve sitting down this time of year, every year, and talking through the issues.
All parties involved, including spouses, need to do this. It's surprising how often people like doing tasks someone else is doing, or they would like to learn. Frequently, people don't like their jobs or are tired of doing them. Keeping farm records is an example; marketing grain and livestock is another.
Then share your list. This allows a forum for discussion and can be the starting place for transition agreements.
These don't need to be complicated. They may be as vague as Dad writing down that he and Mom would like to slow down over the next five years and have more free time to travel. The son or daughter may want to own more of their own operation.
It's surprising how this simple process creates a forum for discussions like, “I didn't know you wanted to be on your own. I thought you always wanted to farm with me.”
This sounds simple, but it's very effective. There will be more on this subject in next month's Riskwise column.
Steven Covey has a new book called “The 8th Habit.” I highly recommend it. In it he shares this study:
Harris Interactive polled 23,000 U.S. residents employed full-time within key industries and in key functional areas. Here are a few of their most stunning findings:
Only 37% said they have a clear understanding of what their organization is trying to achieve and why.
Only one in five was enthusiastic about their team's and organization's goals.
Only one in five said they have a clear “line of sight” between their tasks and their team's and organization's goals.
Only 15% felt their organization fully enables them to execute key goals.
Only 20% fully trusted the organization they work for.
My sense is that family farming operations have similar findings.
In this season of football games, consider this: If the study's findings would be true for a football team, only four of the 11 players would know which goal is theirs.
Only two of the 11 would care.
Only two of the 11 would know what position they play and what they are supposed to do.
And all but two players would in some way be competing against their own team members rather than their opponent.
To make the most effective use of all resources and everyone's talent, we need to communicate. Writing down goals is a place to start. It doesn't have to be complicated.
Moe Russell is president of Russell Consulting Group, Panora, IA. Russell provides risk management advice to clients in 20 states. For more risk management tips, check his Web site (www.russellconsultinggroup.net) or call toll-free 877-333-6135.