It was a large farm with multiple employees and the operation used a punch-card clock to keep track of hours.
The 25-year-old son had his list of jobs to do and he did them. He actually did them well. He showed up for his milking shift at 4:01 every morning and did a great job at his tasks before he punched out.
The issue was that when he punched out, he punched out.
The farm was clearly falling apart and the son didn’t care. It was a $20 million dairy operation, and it was obvious that dad was having a hard time keeping things together. He was a man who liked to control everything to the last detail. It was this personality trait that had made the operation so successful initially, but as it grew beyond the scope of what he could manage personally, things were falling apart. His kids weren’t helping.
As we walked across the yard, I noticed a small, abandoned manure pit that was overflowing with water. Then I saw a dead heifer carcass floating in the pit. I stopped and looked at the son to say, “What do we have going on here?” He said, “Yeah, last fall three heifer calves jumped into that manure pit and drowned.” I asked why he didn’t fix the fence after the first one drowned. He said, “I told dad about it, but he never got around to it.” I said, “Why in the hell didn’t you fix it yourself?” He screamed at me: “It’s not my job and also I don’t know how to fix the fence. Dad never taught me that.” He then went into a rage about how he had no time and he wasn’t getting paid enough to care.
That moment defined the problem facing that farm for the next 20 years. “It’s not my job” was not what I wanted to hear come out of the mouth of a 25-year-old eldest son who was positioned to take over a $20 million farm. Yet for so many successful family farms, this is the situation they face. It takes one generation to start a farm, the second to build it into an empire, and the issue of entitlement is what causes the third generation to run the farm into the ground in a hurry.
Caring more about the weekend than what is going on today is a clear example of that third-generation curse.
The son had gone to the city to study computer programming but quit before a bad report card hit home. He claimed he had made a personal sacrifice for the farm by leaving school when one of the farm’s hands had quit. The reality was that things weren’t panning out for him in the city and he came running home to mommy. He milked two shifts a day, doing nothing more than what was required of him. He worked 50 hours a month and got paid $3,100 plus a free house with utilities. He punched in and punched out.
The father was happy when his son came home to the farm. He had spent his lifetime building an operation his boys could someday take over. When his son went off to school, he was proud of him for getting into a hard program, yet at the same time quietly saddened. His son was exceptionally bright and he had hoped he would develop a keen interest in farming. Yet now that he was back, things just weren’t working out as he had planned. He was happy his son was at home farming and his son was doing a good job. But the son had the wrong work ethic and attitude to succeed at farming. If dad got hit by a truck, the son would not be capable of taking over management.
When planning farm succession, one of the common ideas discussed is that of gifting a son equity in order to change the above scenario. In my opinion, this is the wrong move!
Rule of thumb
Until your son or daughter takes personal internal ownership and motivation in the family farm, don’t succeed any farm assets into his or her name.
Often kids use this as a condition of them actually caring, saying “It’s not my farm; it’s dad’s, and I don’t care about the farm’s profitability until I have a stake in it!” Accountants will often recommend that the farmer transfers ownership of the farm’s asset to the next generation in order to get them interested in the farm’s success. However, this rarely works and often backfires. Often I see sons selling their equity in their mid-30s and leaving the farm for “greener pastures.” For the kid to have assets in the millions, it inspires early semi-retirement from a career that he or she wasn’t that serious about to begin with.
Just because your client has a son who is a certain age whom your client likes doesn’t mean the farm has a successor. If the owners do not have an heir who hits the mark, they should not succeed assets until they do, or the farm will be squandered away within a decade.
As a veterinarian, you are in a position to provide advice the farmer will listen to. Yet at the same time, you don’t want to get dragged into mediating family drama. Three simple pieces of advice you can provide a farmer with a son or daughter in his or her early 20s are:
· Your son or daughter has to starve. He or she has to go out into the world and make his or her own way. Often kids make excuses for staying on the farm or coming home to the farm after failing out of college. In reality, they are not making a sacrifice but rather seeking an easy way out. Coming home is comfy and easy. If coming home to farm is the easy option, then your kid won’t have the character to lead the farm through tough times. Ideally, they should work for another farm, 500 miles away from home, for two years.
· Your son has to have a vision that is different from yours. When I walked through that farm with the son, I asked him what was the farm going to look like in 2030 and what was the future of the dairy industry. He had no clue. All he was concerned about was gaining instant gratification for the problems he was facing that day. A successor needs to have a vision of what he wants to create before he has the gumption to go create it. He needs to get a vision of what he will build the farm into someday. Without a vision, the farm is going nowhere.
· Your daughter or son has to care. Little moments like volunteering to start checking the cattle late at night and getting up at 5 a.m. demonstrate interest in the business. This will mean that she or he might have a different opinion than yours about how to run the operation. But what justifies the difference is that she or he wants to make changes for the altruistic benefit of the farm, not for the convenience of her or his lifestyle. When an heir starts making serious personal sacrifices without complaint for the good of the farm, this is a successor!
These points are just plain common sense, but when heard from a trusted veterinarian, they are golden. The question is, do you care enough about the family and the farm’s future to provide this insight at the right moment? Or is that farm simply another invoice for your clinic until it’s out of business?
Mark Andrew Junkin works with veterinarians to save farm families across North America. 800-474-2057 agriculturestrategy.com