TRANSITION JOURNEY

Farm succession planning requires effective conversations about the future, even if it’s hard

By Andrew Brooks

PASSING THE FAMILY FARM ON TO THE NEXT GENERATION is one of the biggest milestones a dairy farmer will ever face. The process has to be approached carefully, with a clear understanding of what each family member wants and expects. And professional support is invaluable.

That’s where people like farm family coach Elaine Froese come in. Froese and her team of coaches have supported more than 1,000 farm families through the transition process.

The key to a successful farm transition is to enter the discussion with clear objectives and with a desire to make sure every family member’s wants and expectations are acknowledged. That intentionality starts with the concept of “transition” rather than “succession,” Froese says.

Elaine Froese with her Beanie Baby, Ox. The plush toy is her “talking stick.” A family member holds it during a transition meeting to indicate they have the floor and can’t be interrupted. Some clients roll their eyes at the idea until they find out that the no-bull bull actually gives them a voice.

“‘Succession’ implies someone being knocked off the throne but in fact it’s a journey, a transition – the transfer of labour, management and ownership. There are lots of moving parts and it’s never done.”

Froese believes that that most diary farming families fail to work collaboratively between generations because they’re afraid of conflict and failure. “They keep putting off the transition conversation because it’s hard – or they think it will be. I don’t subscribe to that mindset.”

Froese encourages transitioning farm families to focus on “Three Cs”: Clarity of expectations, certainty of timelines and agreements, and commitment to action.

“Clarity of expectations means what do you want your roles to be on this farm, and what are your expectations with regard to income streams for the founders and the successors, housing – which is a really big deal on dairy farms – and fairness to the non-dairy heirs.”

Certainty of timelines and agreements covers the “by when?” factor. “‘By when will I go from being an employee of this dairy to being a stakeholder or a shareholder?’” Froese says. “And from the founders’ point of view, ‘By when will I know you’re committed to this business?’”

Commitment to action simply means that while getting the conversation going can be a job in itself, talk has to be converted into an agreed-upon, executable plan. And everyone has to understand what a transition plan actually is.

The Slits dairy farming family is a textbook case of how well a methodical approach to transition can work. The family is involved in three dairy operations in Perth County, ON: Slits Dairy Farm, Sandy Peaks Dairy and Resolution Dairy.

“It isn’t a one-time thing,” says Linda Slits, one of three siblings. “In our opinion, it’s a journey that takes years, countless conversations and many changes along the way. Our parents let us know they would support all of us in farming if that’s what we wanted, however, we had to make a choice on our involvement.”

THE THREE Cs

The transition planning began when Linda had just started her banking career, sister Bianca was studying nursing, and brother Jeroen had just begun an agriculture degree at University of Guelph. Linda is no longer involved in the dairy farm and is a Vice President of Commercial Banking for Royal Bank.

“When we started planning, my dad said, ‘It’s important we start the conversation early – we can make changes along the way but we’d like to understand how we can best include each of you and how we can support you. It will be something we can then plan for over time.’”

Initially, only the immediate family was around the table, along with the accountant, a lawyer, a banker and the transition consultant. Linda’s, Bianca’s and Jeroen’s partners joined the process later. “It was important to start initially without significant others to have unbiased opinions – but also to start young before we each had our own families established,” Linda says. “Once this happened there could be further iterations and including them in the conversation.”

The transition also factored in the goals of the parents. “We as kids felt it was important to understand what they would like outside of the business for their retirement,” Linda says. Today, parents Pedro and Jolanda run Slits Dairy Farms, Bianca and her partner Maik run Sandy Peaks Dairy, and Jeroen and his partner Caleigh operate Resolution Dairy. Bianca and Jeroen both also have careers outside farming. Eventually the plan envisages two equal dairy farms, one owned and operated by Jeroen and Caleigh and the other by Bianca and Maik.

CLARITY of expectations

CERTAINTY of timelines and agreements

COMMITMENT to action

It doesn’t always go so smoothly. “When I talk to next-generation farmers, they say, ‘the hardest thing is we can’t get our parents to come to the table,’” Froese says. She cites the case of a female client who wanted to transition to ownership and operation of her father’s dairy farm. Her father refused to have the conversation, so she and her partner wound up leaving the farm for about a decade, during which she earned a Master’s degree.

“I was at the farm and I said, ‘Your daughter has a Master’s, she’s intelligent, her husband is in robotics – what’s the problem here?’” Froese recalls. “It was stubbornness and also cultural DNA.” Eventually the father came around and invited his daughter to return to the farm.

No coach can force a farmer into a decision, but they can present alternatives. “My work plants seeds and tools over time,” Froese says. “I didn’t change the father’s mind; he came to that understanding as his health was shifting and he needed to find new options.”

Linda Slits says having someone to facilitate the transition process was invaluable for her family. “They helped us with deadlines and asked some of the hard questions. Ask for advice and don’t be afraid to invest in your succession plan. The most important part is starting early and getting the family conversation going.”

By Robert Price

RONY ODERMATT SAYS HIS FAMILY HAS BEGUN THE COMPLICATED PROCESS OF SUCCESSION PLANNING.

It’s baby steps to start. His father, Josef, a native of Switzerland who came to Canada to farm in 1993, bought a camper to see what life is like off the farm and recently took a trip to Switzerland.

“He’s always on the farm,” Odermatt says of his father, so it was important that the family get the older Odermatt trying new things.

Building a succession plan is especially important since Josef is 56 – an age when he needs to start considering retirement. He’s had five hip operations, meningitis, and small farming accidents, like a pitchfork to the head. Rony, 29, hopes that in four years, when his mother turns 60, he’ll be living on Dunmatt Farm and his parents will be happy living somewhere else.

“That is the gamechanger in moving succession along,” he says. Still, Odermatt says, “It’s a hard conversation.” He and one of his sisters work on the farm and they love life on the farm. “I like not knowing what the day will bring.” But getting everyone in the family at the same table is as difficult as broaching the emotional topic of what to do with the farm when the parents have passed. Odermatt says other producer friends face the same problem. Succession planning is an awkward topic. “It’s not something you talk to friends about.”

But Odermatt says he understands the importance of broaching the difficult topic. His family’s 1,700-acre farm in Dunvegan, ON, milks 190 cows. The business needs acreage and an income sufficient to pay the bills and feed the cows and they need a plan to succeed in the future.

“You can’t chop it up so much that the farm can’t move forward,” he says.

Succession planning – determining who will take over when the farmer retires – is one part of the business that most farmers prefer to ignore.

“They don’t want to retire,” says Tom Blonde, a partner at Baker Tilly

GWD, which offers audit, tax, business advisory and succession planning services in Guelph and Elora, ON.

Farms are unlike other businesses, he explains. Farmers live where their business is. Their lifestyles intertwine with what they do for a living.

“The farm is part of the farmer’s identity,” says Blonde. “The thought of selling or transferring part of your identity and property you’re living on is hard to comprehend.”

But farmers who ignore succession planning are taking a risk.

Worst Case Scenario

Blonde says failure to plan for succession can play out like a bad dream. Imagine a farmer named Burt. In this scenario, Burt dies without having written a will. In the absence of a will, his four children are entitled to their fair share of the farm. Three of them vote to sell the farm to a developer. The one child who has been farming with Burt for decades – and who was never given a share of the business – doesn’t have the equity to buy the other siblings out. Hoping to preserve his lifestyle and hold onto the farm, the young farmer sues the other siblings based on what he thought would happen. In-laws offer their opinions. The family exhausts its resources in a lawsuit. The absence of a plan cripples the family financially and drives a wedge between the grieving siblings.

Getting Started Early

Avoiding the worst-case scenario means starting the succession planning process early. Blonde says he makes a point to bring up succession planning during the tax season and to “make sure my clients are preparing for it.” He also says that farm successors need to stop making assumptions about what might happen after their parents pass and start advocating for themselves and for the future they see for the farm. Likewise, farmers in the position to pass on the business need to step out of the day-to-day and articulate what they want to see happen. The sooner they talk to potential successors about what they hope will happen, the better.

“Succession can get complicated when it comes to tax issues, but that’s not the big stumbling block,” says Blonde. “It’s the need to admit that it’s time to transition.”

Source: Farmers Wanted: The labour renewal Canada needs to build the next green revolution, RBC, April 2023