By Connor Lynch
CAMBRIDGE — Much like Christmas shopping, going to the dentist and going skydiving, farm succession planning is one of things that gets talked about a lot more than it gets done.
The vast majority of Ontario farmers are talking about succession planning, according to a survey by the Ontario Federation of Agriculture. But none of the farmers in that survey had anything written down. According to data from the 2016 Census of Agriculture, less than 10 per cent of farmers have a written succession plan.
That’s a mistake, says Cambridge-area organic dairy farmer John Brunsveld. “If you’re thinking about it, pick up the phone in the next hour and call,” he said. A succession planner, that is: there’s no shortage of them in Ontario.
Brunsveld, who has three sons, two of who are currently active on the farm, freely admits he got lucky. He took over his family farm back in 1988 after coming from an ag company job he jumped in after graduating from university. He has three siblings but he was the only one who wanted to farm. His father already had things sketched out, roughly, in his mind: he would give one son a lot off of the farm, he would build a house for one daughter and give the house he built to the other daughter. That left the farm for Brunsveld. “It was crude and rough but it worked pretty good. But you just can’t do that anymore. It’s’ too big. There’s too many unknowns.”
And Brunsveld is well aware that he’s the exception, not the rule. “When I hear of other guys my age, I shudder when I hear what happened,” including a couple of horror stories of long-lost aunts or cousins coming out of the woodwork to claim ownership of the farm.
Succession planner and crop farmer Len Davies started Davies Legacy Planning Group 20 years ago. He took over the farm from his father, who took it over from his grandfather. His grandfather’s succession planning probably happened too late with too little planning. His father’s plan, in the interest of not starting too late, started too soon.
So how to do you do it right? Start with writing it down. “Anything not
written down is a wish,” Davies said. “Anything written down is a
goal.”
Next, goalposts. Set rough
timelines for transferring the four different parts of a farm:
management, growth, value and control. Most people come into the process
only thinking about ownership, Davies said. But all four need to be
transferred at some point.
Part of that is setting timelines, even if they’re rough. What’s getting transferred to whom, when, and how much of it.
And succession plans need to be living documents. Come back to the plan, review it, change it if need be. Make sure things are spaced out, Davies said, because otherwise farms tend to run into one of the biggest hurdles in succession planning: not following the plan. Make the plan too dense and it’s more than parents are willing to bite off. “Take this bite this year, another next year. Like an elephant, you can’t do it in one bite.”
When to start? Davies’ guideline is the 60-30 rule, when the parents are hitting 60 and kids are hitting 30. But lay the groundwork earlier: start transferring management responsibilities when the kids are in their 20s. Start bringing them to the accountant and the banker, he said. “When I do succession planning and want to talk about financials, parents say they don’t want the kids to know. What?” Ideally, you want your kids to be dragging you along to see the banker when they’re in their 30s, not the other way around, he said.
Ultimately a good succession plan is part of a good business plan, Davies said. Farming as a business is all about risk management, and succession is no different. Getting a solid plan in place eliminates a lot of risk and uncertainty, particularly around personal issues that can arise. “What happens if someone dies? What happens if someone gets remarried? What happens if someone gets disabled? If dad and mum are in an accident, who gets control of the business? What happens if the son gets disabled? What happens if there’s a divorce? You can deal with that. There are mechanisms.” These are questions that are only disturbing so long as they don’t have answers. But succession planning can provide answers in advance.
A big asset for increasingly big modern farms when it comes to succession planning is communicating like it’s actually a business, not a family operation. “Communication is always an issue,” whether it’s because of a son who’s not ready for a meeting with the succession planner because his father told him about it an hour before it was supposed to happen, or one brother only mentioning the $80,000 tractor he bought the other day to his brother because they were meeting with the succession planner and talking finances.
“Today’s farms are businesses,” which means meetings are important. “Daily, monthly, quarterly.”
And be willing to accept a working plan, even if it means the plan
isn’t perfect, he said. “There is a difference between getting it right
vs. perfect.”
Brunsveld is still working through the succession process with his kids.
Two
sons are on the farm and a third son who’s currently training to be an
account manager at Royal Bank of Canada, might return, although
Brunsveld thinks he might “like money too much.” The plan is to transfer
10 per cent of the corporation’s shares to his two sons next year, and
go from there.
As part of the process, treating the business like a business, everyone involved evaluated everyone else’s skills, he said. That meant he took a look at what his sons were good at, and what they weren’t. It also meant they took a look at what he was, and wasn’t, good at. “It’s painful, a little painful, to have your sons and daughters doing an analysis of your skillset. It’s humbling. But necessary. And I have to say, all the things they said, some of it hurt but they were right.”
In a family operation, the temptation can be to let sleeping dogs lie. But if a succession plan is going to succeed, that can’t be the mentality. “You better wake up the sleeping dogs.”
