Passing the farm from one generation to the next is one of the most important, and often difficult, transitions farmers can make. Succession planning is not a one-time decision but a gradual process that takes years of preparation. It’s rarely seamless, and often requires navigating complex emotions, financial realities and family dynamics.
According to Wesley Tucker, a farm and ranch transition specialist at the University of Missouri Extension, successful transitions tend to follow five phases. Each phase allows both generations to prepare for the changes ahead while preserving the farm’s legacy.
Phase I: Seek education and experience away from home.
Wesley first encourages the next generation of owners to gain work experience away from the family farm. This could mean working on another farm or agribusiness or in a related industry. These outside experiences allow that individual (or individuals) to build new skills, gain new perspectives and experience different leadership styles.
“For instance, if your family owns a row crop operation, it might be smart to learn about grain merchandising from another business,” Wesley said. “The experience could make you a better marketer for your crop.”
Time away doesn’t always require taking on a traditional job outside the farm. Involvement in peer networks, educational opportunities and other programs geared toward the upcoming generation of farmers can provide valuable learning opportunities. For, example, Farm Credit Mid-America’s Growing Forward® program is designed to help young and beginning farmers strengthen their farm management skills, increase their financial acumen and build a strong network with other farmers.
Phase II: Work for a trial period on the family farm.
After gaining experience away from the farm, Wesley recommends having the future owner work for the farm for one to two years during what he calls a “trial period.”
“Family businesses are the hardest to run because it’s difficult to separate the family and business roles,” Wesley said. “I suggest writing a job description and discussing compensation packages. The more you can treat this like we aren’t related, the better.”
During this trial period, communication is critical. Families should set aside regular time to discuss goals, progress, and challenges. Whether those meetings happen monthly or quarterly is up to the family to decide. The important part is making sure they happen.
“We can agree communication is key to a family business, but unless we set aside time to have actual business meetings, it won’t happen,” Wesley said.
At the end of the trial period, Wesley recommends sitting down and having an honest evaluation. Decide whether working together is sustainable or if it creates friction that will be detrimental to both the family and the operation. If there is friction, it may be best to begin to explore other options for succession.
Phase III: Introduce ownership and management responsibilities.
If both generations agree to move forward, the next phase is to gradually introduce ownership and management responsibilities to the successor.
Questions to consider and answer include:
- What areas of the operation can the younger generation specialize in?
- What management responsibilities are they ready to lead?
- What ownership stakes or financial responsibilities will they assume-and on what timeline?
This is meant to be a gradual process. By allowing your successor to slowly understand every aspect of operating the farm, you can be there to answer questions and provide context. This is especially important when it comes to managing the farm’s finances.
“Sometimes it can be difficult to discuss the finances of the operation,” Wesley said. “At this phase, it’s critical to make sure you are setting up the younger generation to be your successor. A key part is helping them understand financial management and debt.”
This is a great time for the successor to build a stronger relationship with the operation’s financial partners and advisors. These experts can offer helpful resources and serve as a sounding board for the future owners to ask questions and gain confidence before taking full ownership of the farm.
Phase IV: Advance ownership and management responsibilities.
At this stage, the younger generation should be taking a leading role in management, marketing, purchasing and financial decision-making.
“The older generation can struggle to truly let go of the finances,” Tucker acknowledges. “However, if the younger generation is not prepared to be a good financial manager, we are setting them up for failure.”
To succeed, the younger generation must be actively involved in financial discussions with the farm’s advisors. This is a pivotal phase where many transitions to the next generations stall, because it requires the established generation to step back and allow new leadership to grow. If you are part of that established generation and struggling with this phase, remember that this a critical step toward preserving the legacy of what you’ve built.
Phase V: Transition to majority manager and owner.
Finally, the younger generation becomes the majority manager and owner of the operation, and the established generation shifts into a new role as coach and mentor.
“Again, this is all about communication,” Wesley said. “The older generation is about to play the most important role they have ever played in their operation as coach and mentor. It’s about continuing to support the younger generation. You want them to be prepared to run the operation when you’re gone.”
This shift can be very emotional, as farming is deeply tied to identity. Tucker reminds families that stepping back does not mean letting go of being a farmer.
“You are still a farmer,” Wesley said. “Your identity is still preserved. Now, you’re no longer focusing on your success. You’re focusing on helping the next generation be successful.”
Succession planning is complex and often difficult. Farm families can approach the process with more structure and less fear by breaking it up into these phases. Every operation is unique, and no family should go through this process alone. By leaning on open communication, practical experiences, and a circle of trusted advisors, families can position the next generation for success and preserve the farm’s legacy for years to come.
