Farm succession should be viewed as transfer of legacy, expert says
By Eric Mortenson
Most business owners are eager to pass the enterprise to the next generation, but good intentions are a risky crop. Seventy percent of family business transitions fail, a farm succession expert says, and the rate in agriculture may be worse.
Rod Sharp, a Colorado State University professor who will speak Nov. 4 at a farm succession workshop in Salem, Ore., said the issue is quickly coming to a head. The average age of American farmers is 57, and the fastest growing segment of farm operators is the group 65 and older, according to the 2007 U.S. Census of Agriculture.
“With the increasing age of farmers and ranchers throughout the country, there will be a lot of turnover or transfer of ag land in the near future,” Sharp said. “Our goal is to help people prepare for that so the percentage of success rate goes up.”
Sharp, an agriculture economist, is the keynote speaker Monday at a farm legacy workshop titled, “Planning for the Four Seasons: Birth, growth, retirement, succession.” The event happens at the Best Western Mill Creek Inn in Salem. Sharp’s presentation is at 9:30; lunch speakers include Katy Coba, director of the Oregon Department of Agriculture, and state Rep. Tina Kotek, Oregon speaker of the House. The event is presented by the Oregon Farm Bureau’s Women’s Advisory Council and is sponsored by the Capital Press.
Sharp said generational transitions are especially difficult in agriculture. Farmers tend to work to an older age than people in other occupations, and many don’t expect to retire. Instead, they envision themselves reducing work hours or the scope of their business, neither of which is easy to accomplish on a farm. In addition, farmers are emotionally attached to the land, and have a hard time letting go.
“Their whole life and livelihood is associated with working every day,” Sharp said. “If anything, their goal is to scale back instead of leave and retire. The other issue is they don’t have any hobbies or friends outside of agriculture — it makes it difficult to leave.”
Money, of course, is part of the problem. Non-farm business owners usually have a retirement account, but farmers often invest their earnings in the operation, buying land or equipment.
“It’s tough to retire because they don’t have the cash flow to just leave the ranch,” Sharp said. “Without having somebody paying them rent or leases, or buying their assets, they don’t have the cash flow to do that.”
Sharp and others recommend a planning process in which family members communicate openly about the transition. Mike Omeg, a fifth-generation cherry orchardist in The Dalles, Ore., said he and his retiring father met with a planner for a year to iron out the difficult details.
“It’s like ripping off the Band-Aid,” Omeg said.
Sharp said succession planning involves more than deciding how to transfer real estate and assets.
“We spend time building on the inter-generational relationships, that’s the important part: communicating so everybody’s on the same page.
He encourages retiring parents to document their beliefs and life lessons in addition to deciding who gets the silverware.
“Life lessons are more important to pass on to the next generation than assets,” he said. “This whole idea of passing on a legacy as opposed to an inheritance — people like that idea.”