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Family Business Matters       05/28 14:39

   Take a Chance on Change

   Adjustments to business plans should be made sooner rather than later.

By Lance Woodbury
DTN Farm Business Adviser

   Farmers and ranchers are risk-takers. Their livelihood depends on acts of 
faith and uncertainty. The economic results of planting a crop or raising an 
animal are heavily contingent on factors outside of their control: commodity 
prices, weather and government policies. Las Vegas pales in comparison to the 
gambling that goes on daily in production agriculture.

   But, when it comes to making the necessary changes in the "family" part of 
their businesses, farmers and ranchers aren't nearly risky enough. Adjustments 
are not made early or quickly to help the family and the business perform or 
survive. We put up with uncertainty, conflict, disrespectful behavior and poor 
financial performance for years, often to the detriment of the organization. 
Consider these changes that should be made sooner rather than later:

   BUSINESS ROLES

   We often assume that a particular role needs to be filled by a family 
member, that certain tasks need to be done by "one of us" for reasons of 
control or privacy. But, what happens when a family member is not good at or 
doesn't enjoy his or her role? What if the family member bookkeeper doesn't 
really understand accounting? What if the family member who supervises others 
doesn't know how to manage people? What if the family member responsible for 
risk management is terrible at marketing? Instead of taking a risk on putting 
the right non-family people in the right roles, the business limps along with 
subpar performance.  

   FAMILY RELATIONSHIPS

   Conflict exists in any workplace, but conflict between family members 
creates a toxic environment for everyone. Why are bad relationships tolerated 
in the family business? One reason is that we often confuse being in the 
business with being in the family. Unless everyone is in the business, the 
family won't function. But, it often works the other way: Because everyone is 
in the business, the family doesn't function. Instead of taking a risk on 
getting family members out of business together, the family members continue to 
fight or avoid each other, leaving feelings of disappointment and resentment 
about the family not getting along.

   PLANNING PROCESSES

   Many family business members wish they had started sooner in their 
communication and planning efforts. If they had discussed "the future" at an 
earlier time, they might have avoided much pain and difficulty in the family 
and the business. This is especially true when it comes to how the business or 
assets will be divided in the future. Family members end up as partners or are 
left with equal ownership in nonliquid assets (like land or partnership 
interests) when the right process years prior could have avoided the capital 
and relational turmoil that comes with "undoing" the parents' estate plan. 
Instead of taking a risk on openly discussing the future, assumptions flourish 
and plans get made that ultimately put assets and relationships at even greater 
risk.

   FINANCIAL PERFORMANCE

   Is production agriculture a business, or is it a lifestyle? For many, it is 
both. However, not understanding the critical financial components of a farm or 
ranch threatens future generations' ability to experience the family legacy. 
Not knowing concepts and not using tools around budgeting, accrual accounting, 
income tax strategy, estate planning, debt structure and working capital can 
spell the end of the family business. Instead of taking a risk on implementing 
more discipline or hiring the right advisers, equity begins to erode until the 
family farm or ranch can no longer survive.

   Farmers and ranchers are remarkably adept at changing their business 
practices when weather, markets or policies force the change. If you apply that 
same survival instinct to the communication and planning needs of your farm or 
ranch, future generations will applaud the changes.

   **

   Editor's Note: Write Lance Woodbury at Family Business Matters, 2204 
Lakeshore Dr., Suite 415, Birmingham, AL 35209, or email lance@agprogress.com


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