The Recipe for a Strong Family Business Succession Plan
Maintaining a family agribusiness in California today is no easy task. Risk factors like high land and input costs, water availability, regulation and consolidation all pressure local, independent businesses. That pressure ratchets up at key times in a business’ life cycle, like when transitioning it to the next generation.
It’s against this backdrop that the Lyman family — led by brothers Les, Scott and Tom — enlisted Lois Lang to help assemble a business succession plan that maintained Grow West as an independent family business. It’s an often complicated planning process that combines the mechanics of business operation with sometimes sensitive family relationships. Overcoming the hurdles this combination can throw up starts with a clear, shared vision for the future of a business as well as the acknowledgment of the inevitable.
“You have to determine the next leaders, then plan on the transfer with the family. Mixed into all of that is the fact that eventually a family business member will be passing. That’s the crux of succession planning in my mind,” says Lang, a succession readiness specialist with Evolve Partner Group in Stockton. “It’s hard to look at our own mortality in such a business-related process. It takes maturity and a lot of discipline.”
Succession planning is sometimes an emotional process
A Psy.D. in industrial organizational psychology and MBA, Lang has worked with many farm and agribusiness families to build succession plans. She knows well that agriculture is unique in the emotional ties created by working the land or supporting others in doing so. Strong succession planning for a farm or agribusiness shouldn’t spurn those ties but integrate them into building a “healthy” process for all involved.
“The big question to ask in looking at any business is ‘Are you truly letting go?’ You have to be ready to look at the business and its future,” she says. “A lot of farmers aren’t very communicative, but it’s really important that the whole family — mom, dad, kids, cousins, their spouses — agree and have the same ethics when it comes to sustaining a business.”
Common traits of effective succession planning
Lang says effective succession plans have a few common characteristics:
- A shared vision. Sometimes a difficult step in the process, it’s important to enter into succession planning with agreement among family members and stakeholders.
- Realistic expectations. Lang says her goal with any family business succession plan is to “help sustain family wealth and security.” All stakeholders should agree on how they define success, and in some cases, that may involve making a tough choice about the future of a family business.
- Discipline. It’s sometimes easy for emotion to guide the decision-making process in assembling a farm or agribusiness succession plan. Have the discipline to first build a strong plan, then follow it over time. Changes can and should be made over time as the business evolves, but in doing so, stick to the original succession vision. On-going estate, tax and business planning require discipline to implement.
- Not basing decisions on “what dad or grandpa did before me.” Especially in agriculture, this mindset can make it tough to successfully pass a family business to the next generation. Think about the best strategy and tactics for your family, not what your predecessors did in the same situation.
- Clear roles and responsibilities. Every family business stakeholder should have his or her defined role in both the business and succession process. Some may not be as directly involved in the business as others or have different responsibilities altogether. Clearly defining these roles early on is fundamental to the success of a transition to the next generation.
- Teamwork. This extends beyond family members. Lang sees herself as one member of a team of specialists who can deliver on the components critical to any effective succession plan. Legal, tax, business and financial specialists are also members of the team family business owners should involve early in the succession planning process.
Grading the Lyman family business succession plan
Lang has helped assemble scores of family business succession plans with a range of effectiveness and ease of implementation. Working with families is challenging at times and rewarding at others, and she says the Lyman family has been in the latter category. She attributes that to their approach to not just Grow West as a business, but their lives and family legacy in general.
“They’re not ostentatious and over the top. They’re very thoughtful and want to make sure their children and spouses are prepared to continue managing the business with the same kind of mission and values their fathers and grandfather did,” Lang says. “The next generation is made up of very mature, successful people who aren’t sitting around waiting for something to happen. For me, this has been a great one.”
If interested in exploring your business succession plan, Lang can be contacted directly with questions at Evolve Partner Group.