Questions to answer about farming together

There are critical factors for determining the success of a two-generation farming operation, wrote Don Hofstrand, a retired Iowa State University-Extension agricultural-business specialist.

An honest evaluation of several questions can help operators assess the chances of farming together successfully.

Are the parents ready for a partner? – Parents are often delighted at the prospect of sharing the workload. But the new person is not a hired hand. After years of calling the shots, the parents are faced with the prospect of sharing control and management decisions. Also because the business income is now shared, they may need to lower their standard of living.

Is the younger party committed to farming? – Is this an “I’ll give it a try” situation? Is the younger party married? If so, does the spouse like farm life? If he or she is not married, exercise caution, because you may not know who all the future parties will be. If there is some doubt regarding the younger party’s commitment to farming, avoid entering into a partnership, corporation or other business arrangement where there is co-ownership of property. Staying in the testing stage where the two parties operate under an employer-employee arrangement would be easier to terminate.

Does the family have a common vision of where they are going and what they want to accomplish? – Only after a careful examination of each party’s goals can a family begin to formulate a common vision of how the business will look in the future. If any conflicts in goals arise, now is the time to reconcile the differences.

Is the farm large enough? – No matter how well the parties get along personally, a two-generation business arrangement may not succeed if the business earnings are inadequate or the business is financially unsound. The business must provide the parents with a desired level of living as well as provide for their economic security during retirement years. In addition, it should meet the younger person’s living needs as well as permit adequate debt servicing and growth in business equity.

Can both parties live and work together? –  Relationships are critical to the success of any two-generation business arrangement. All parties need to be tolerant, understanding and have the ability to overlook others’ faults. In addition, mutual respect between the parties is important. Problems can arise as to housing, spendable income, labor commitments and lifestyles. When goals and values differ, care must be taken to arrive at a reasonable compromise. Joint participation in managerial decisions is another must if a two-generation arrangement is to succeed.

Are there non-farming children and how will they be treated? – Recognize that another prime goal of the family is the maintenance of overall family goodwill. Plans should provide for the fair and equitable treatment of other heirs and the financial security of the parents. Agreements that unduly favor one family member should be avoided.