3. Characteristics of Feed
Businesses Sold to Competitor
Did not identify and groom a successor.
Did not have written business plans.
Managed the business to avoid paying
income taxes.
Did not utilize accrual accounting to
measure profitability.
3
4. What Makes a Business
Transferrable?
Profitability or potential for future profit
Incoming generation is building equity in
the business.
Incoming generation has demonstrated
management potential.
Present generation is willing to transfer
management.
Written agreements – buy/sell, operating,
etc.
Estate plan in place
4
8. Cornell Resources
September 2010 E.B. 2010-09
Profiles of Successful Farm Transfers on Long Island
Charles H. Dyson School of Applied Economics and Management
College of Agriculture and Life Sciences
Cornell University
Ithaca, NY 14853-78018
9. Long Island Study Successful
Factors
Involve the junior generation in the
business early on by delegating
management responsibilities.
Increase management responsibilities
when the junior generation demonstrates
their management abilities.
Conduct routine business meetings.
Develop job descriptions for everyone
involved in the business.
9
10. Long Island Study,
Continued
Having a profitable business with
opportunities for increased revenue
growth will entice the junior generation to
grow the business.
Allow the junior generation to succeed
with new ideas, as well as fail when
changes take place.
Create a positive work environment
between management and employees that
will allow for business succession.
10
11. Long Island Study
Put a timeline in place for business
transfer and communicate the timeline to
the junior generation.
Enlist outside assistance to facilitate
business transfer.
Employ a multitude of planning tools to
facilitate an effective business transfer.
Periodically review one’s plan to make
changes when necessary.
11
12. Business Transfer Insights from Dr. George Conneman,
Emeritus Professor, Charles H. Dyson School of Applied
Economics and Management at Cornell University
Management responsibilities need to be
transferred before assets.
A neutral third party probably needs to be
involved to accomplish the process.
Timely transfer is a must. A date to end
the process is a necessity.
Compromise, trust, respect, ability to work
with others is required. Don’t take
advantage of the other party.
12
13. Conneman, continued
Involve everyone in family from the very
beginning.
Business-like methods need to be utilized
at all stages of the transition process.
Good communication involves both talking
and listening.
In the vast majority of cases, significant
outside work experience is a prerequisite
to a healthy career in the family business.
13
14. Conneman
Business owners can rarely retire “cold
turkey” – they need five years to prepare
and substantial interests outside the
business to look forward to.
No succession plan is complete until the
parents transfer voting control to the next
generation. The surprise return of a once-
retired business owner is frightfully
common.
14
15. Management Transfer
Accomplished through a process very
similar to career/executive development
in major industries.
Process should begin early in family run
businesses.
15
17. Management Transfer
Components
Grooming employees/family to be ready to
handle responsibility.
Identifying specific skills of individuals on
the team and matching positions with
skills.
Putting together career development plans
combined with professional development.
Reviewing progress in an annual
performance review.
17
18. Grooming Management
Provide freedom to make business
decisions and have authority, as well as
responsibility.
Identify a mentor for members of the
management team.
Allow employees/family opportunities for
success, as well as chance for failure.
18
19. Example
Incoming family member begins as
employee.
Successfully demonstrates management
ability.
Takes on increased responsibility over
time.
Acquires equity via purchase or stock
transfer.
19
21. Ensuring Success
Develop written agreements with outside
assistance from consultants and attorneys.
Define parameters for annual performance
reviews.
Operate in a business-like manner.
Develop a business plan.
Conduct routine staff meetings.
Develop formal job descriptions.
Utilize an employee handbook.
21
23. Items in an Agreement
Term agreement is in effect.
Parties involved in agreement.
Timeline for acquiring equity via purchase
or transfer.
May include a buy/sell arrangement.
Process for dissolving agreement if either
side wishes to withdraw.
23
24. Identifying Skills
Many skills assessment tools available.
Gallup
DISC
Myers Briggs
Etc.
24
25. Gallup Skills Assessment
Quantifies 34 specific skills/attributes.
Asserts that individual success may be
defined by a combination of five skills.
Based on a 30 year study conducted by
Gallup.
Over 7 million have taken the assessment.
25
26. For More Information
Strengths Based Leadership, Rath and
Conchie.
Characteristics of Effective Leaders
Identifying your strengths and investing in other’s strengths.
Placing individuals with the right strengths for the position on
your team.
Understanding and meeting leadership needs of your team.
26
28. DISC
Utilized in leadership
Different leadership methods may be required with
each personality type.
Problem solving when problems occur in a leadership
team.
Accounting for each personality type on the team to solve
problems.
28
32. IBM’s Career Development
Process
Driven by corporate strategy.
Strategy may change over time and helps determine:
Where to make investments in employee training
Helps managers determine career expectations with employees
to obtain necessary skills.
32
33. Steps in the IBM Process
Select and develop new employees
Attract and recruit the best talent.
Introduce employees to organizational culture.
Utilize “onboarding” – new employee orientation.
33
34. IBM Steps
Assess skill levels
Identify skill needs.
Assess skill levels and identify gaps in skills.
Develop plans to close skill gaps.
34
35. IBM
Build capacity
Build and identify employee capability.
Build organizational capability
Provide career access paths.
35
36. IBM
Create development plans.
Identify career development goals and compliment
with a plan.
Utilize development programs to close gaps.
Team managers and employees in the development
process.
36
37. IBM
Provide collaborative opportunities.
Identify mentors and provide opportunities for
mentorship.
Create on the job learning opportunities.
37
38. IBM
Measure success
Define and implement a measurement plan.
Monitor and measure results.
Change course if necessary.
38
41. Importance of Planning
41
Four key areas of successful farm businesses
* Have a strategic plan
* Completed a farm business transfer plan
* Defined rules for employee conduct
* Conduct annual performance appraisals
42. Importance of Planning
42
Percent(%)
Response value
Written Implementation of Management Practices
Strategic plan
Transfer plan
Conduct/performance rules
Annual performance appraisals
43. Business Plans and Succession
Planning
43
Business plans considered:
Unwieldy and too difficult to write
Not helpful due to projections not being accurate
Much more willing to tackle once they understand:
Strategic plan is a component, and important for growth
Marketing plan builds off of the business plan
Transitional plan easier if built off of a business plan
44. How We Help
44
Free, Confidential On-Farm Consulting
Financial Consultants
Personal/Family Consultants
45. Business Meetings
Role Selection
Working Agreements
Agenda input
Process
Decision making
Problems
45
