10 commandments for business continuity

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Editor's note: The following article was originally featured in the July-August issue of Bovine Veterinarian, available here.

click image to zoomMark Junkin With each new generation, every family farm is going to grow in a different direction.  The question is, how? 

It’s natural for a son or daughter to want to grow a farm in a different direction from how his or her parents or grandparents would.  It really doesn’t matter what the son or daughter grows or how the production parameters are different.  The question that matters is, are the same principles which made the previous generation successful being applied?  Or are they being forgotten, resulting in an 80 percent probability of failure? 

I once had a father/son situation whereby it would be impossible to be a better hog operator than the father.  He had immigrated to Canada with nothing and had built a sizeable multi-site hog operation. 

One of the ways he had achieved this success was by always working out his mistakes with a pencil first.  The father had never made any investment which didn’t return at least 7 percent ROI on paper.  Granted there were a few times investments didn’t pan out as expected, but overall he had been extremely successful. 

His son was an extremely hard worker, and I simply could not speak enough praise for his character.  He shared many of the traits of his father.  Yet, he wanted to be the opposite of his father.  He complained that he was tired of being inside a concrete barn all day.  He wanted to spend more time outdoors and farm holistically.  He had a vision of raising clean, green Dexter organic beef cows.  

Now there was absolutely nothing wrong with his son’s vision, and niche marketing is definitely a trend.  However, his son wanted to instantly jump into things and do it in a big way without thinking.  He was passionate about his vision and it was very emotional for him.  He wanted to “just do it” and didn’t care about the details.  He wanted instant results.   

This is because the son was born with a silver spoon in his mouth and had never starved!   

For several months, I worked with the son to formulate a business plan, and we looked at it from multiple perspectives.  It simply didn’t cash flow and didn’t make sense whatsoever.  Yet the son wanted to do it that spring anyway.  He didn’t care about what worked on paper; his gut told him it would work out.  He spoke to me of risk as if he was reading a motivational poster in an accountant’s office, not as a man who had experienced it. The son never knew what it was like to fail and starve.  Thus he had romantic visions of taking risk! 

Yet, the father wrote the check to finance his son’s dreams.  On one hand, anyone would have to admire the father for supporting his son’s dreams, no matter the reservation.  However, the question is, what is going to be the end result?  That farm could risk $200,000, but if that capital was lost, would the father continue to support his son’s dreams? 

The bigger issue was that the father was passing on capital, not wisdom.  The most valuable lesson the father could have passed on to his son is this: “If it cash flows and your assumptions are reasonable, we’ll do it.  If it doesn’t pencil out, go back to the drawing board until it does.”  It doesn’t matter what the rule of thumb is, if it’s a family value that has made you successful, it’s critical it gets passed on! 

Another family farm faced similar challenges at the same time.  Yet, the parents had previously developed a list of 10 commandments which had dictated the farm’s success in the past.  One of these commandments was, “Work your mistakes out on paper with a pencil before you spend a nickel.” 

By having a list of “family values” the parents had an out.  They could say no to their son’s dreams, without being discouraging.  In fact, they encouraged the son on his first draft of the business plan and told him to “sharpen his pencil and go back to the drawing board until the numbers worked out realistically.”  The son came back to the father with various revisions and after draft No. 4, they invested.  The ability to say no nicely, with a reason, and to encourage a family member to go back until it works, are critical!

So am I saying don’t support your son’s or daughter’s dreams? Absolutely not!  What I am saying is to help your clients figure out what 10 things made them successful and chisel those values in stone. Suggest they spend six months thinking about 10 commandments, carrying them in their pocket on a slip of paper.  Then have them frame it and share those values openly with their kids. 

As a veterinarian, you often see things happen that make you cringe.  You see bright sons who hold a lot of potential get misguided and set down the wrong path due to misconstrued ideas.  They don’t comprehend the principles that made the family successful and instead listen to fools. Abandoning these principles is what causes farming empires to topple.  Coming from established farming empires with easy access to credit, they don’t make little mistakes; they make big mistakes quickly and it sends generations of hard work tumbling within a few precious years — either that or the family has a dysfunctional decade of family fights whereby the father holds back any growth due to his fears of taking big risks, eventually making the farm obsolete and outdated.  Both scenerios aren’t right and not only lead to unprofitable farms but unhappy families. 

As a veterinarian, many of your clients don’t see you as just an animal-health technician but as a trusted advisor and family friend.  These families often look to you for advice, but you’ve got to watch that you don’t overstep your bounds.  You can’t interfere with the relationships between parents and heirs about business decisions in most cases, and if you do, it will often lead you down a path with your clients that you don’t want to go.  However, you can get your clients to think about the big picture. 

Suggest to them that developing 10 commandments that have made the farm successful will help the farm determine future strategic moves.  Creation of these 10 commandments helps the younger generation better appreciate the key ingredients to success and also reminds the elder generation of what actually made them successful.  It helps establish the rules for the game, so that both individuals can “play ball” fairly. 

This process might seem nerdy and, frankly, it is.  Farmers feel awkward about writing a list of 10 things that made them successful for so many reasons.  Yet it will prevent many family arguments, and your clients won’t have to say no to their kids’ dreams without coming up with a good reason.  It allows your farmers to point to a rule and then encourage their sons or daughters to structure their dreams around the framework of what has made them successful.  It creates sanity in the crazy process of farm succession.         

Wisdom is worth more than money to pass on.

Mark Andrew Junkin is the author of Farming with Family Ain’t Always Easy and speaks regularly on the topic. He also subcontracts with veterinary clinics and facilitates family business meetings to improve decision making, transitions to the next generation and management within operations with sibling rivalries. Find more information at www.agriculturestrategy.com or call 800-474-2057.


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