Managing for Today and Tomorrow Introduction - Part One Transition Planning

Course Objective Create and implement an overall strategy to move the farm or ranch business from one generation to the next By developing the knowledge and skills necessary to begin a conversation leading to the development and implementation of a farm/ranch transition plan.

Learning Objectives Understand the concepts of succession, business, estate and retirement planning How concepts are combined to create a transition plan Access on-line information and planning tools Understand the process of setting personal and business goals Use communication to define and implement transition goals At this point, you will want to introduce and complete the pre-class evaluation.

Favorite Flower Who Will You Share With Teach Your Classmates Favorite Farm Chore Your Name ICE BREAKER: Managing for Today and Tomorrow is a Hands on program. Pass out blank hands. And give the following instructions. On the palm- write your name On the thumb- write the name of your town in your address. On the index finger- write down your favorite chore on the farm. On the middle finger- write down one thing you can teach your fellow participants. On the ring finger- write down your favorite flower. On the pinky – write down who you will share what you learn in Managing for Today and Tomorrow. Class facilitator or coordinator will want to record the various answers for all fingers. Facilitator should be prepared in case a participant is single, widowed or has no family. Know your audience…..Remember we can not funnel participants into a solution. Your Town

What is Transition Planning? Transition Planning is the process of creating and implementing an overall strategy to move the farm or ranch business from one generation to the next. Many farms and ranches will continue to be productive agricultural businesses beyond the life of the current owners. Transition planning is the process by which the ownership and the management of the family business are transferred to the next generation.

What is Transition Planning? A gradual and carefully planned shift to new owners is recommended; whether to family heirs or non-related persons. Farm families make important transition decisions through succession, business, estate, and retirement planning. Transition planning is the process by which the ownership and the management of the family business are transferred to the next generation.

Transition Planning is… Managing for Today and Tomorrow Family Planning Business Planning Risk Planning Financial Independence Planning Succession Planning Estate Planning Over the next four weeks you will be introduced to the tools you need, not only to make a choice of transitioning a farm or ranch business or passing a group of assets to the next generation, but what and how to use the tools available to accomplish the transition. “Succession planning is a continuous process to transfer knowledge, skills, labor, management, control and ownership between the generations.” Simply stated: “Transition or succession planning is the process by which the ownership and the management of the family business are transferred to the next generation.” Succession Planning – Process of identifying and developing internal people Estate Planning – Anticipate and arrange for the disposal of an estate – eliminate uncertainties over the administration of a probate Retirement Planning – Allocation of finances for retirement – setting aside money or assets to obtain a steady income stream at retirement Business Planning – Formal statement of business goals – decision making tools

A Question… …on the mind of many farm families: Do I want to pass my family business on to my heirs as an ongoing business or do I want to pass it on as a group of assets? This is the main question that we are challenging each farm and ranch business to ask.

Eight Questions Ask these questions about your future: What do we want to happen to our business? Is there a “future” for the business? How do we develop the next generation of managers? How can each generation communicate their needs, desires and aspirations? These are 4 of the 8 basic questions about farm transition/succession planning; we will address each one over the duration of the course.

Eight Questions cont’d Ask these questions about your future: Are plans being made for retirement? What are our plans for the unexpected? How can I treat my heirs fairly? What is the best way to transfer my farm and personal assets? These are the rest of the basic questions about farm transition/succession planning; we will address each one over the duration of the course.

Determining Business Direction The Farm Family Family & Farm History Current Farm Operation Current Family Status Family Values Family Goals Individual Assessment Communication Skills Financial Skills Production Skills Management Skills Risk Management Skills Business Analysis Land & Capital Resources Labor Management Marketing Plan External Influences   Mission Statement Personal Goals Business Goals Family values is the place to start the thought process. Personal story of Dad and Mom coming to the US. Is the business large enough to support the next generation? What are the skills of the successor generation?

Transition Planning Business Planning Retirement Succession Estate Timing of Retirement Grooming Successors Valuing The Estate Financial Planning Retirement Income Sources Financing the Succession Planning Your Will Retirement Income Needs Personnel Succession Strategies Planning Your Needs Marketing Life After Retirement Fairness To All Heirs Liquidity Needs Risk Management Farm Withdrawals Tax Planning Have participants pull the farm business planning model from their notebook (file: eSPFC) and describe how transition planning interplays with a lot of planning areas. Also, how these tools can be and their goals can be used to determine whether they are planning a farm or ranch transition or a dispersal of assets (estate plan). This file should also be correlated with the long form flow chart Margaret developed. Reemphasize the difference between the tools and correlate them with the chart. The investment plan will be part of both Business and Retirement Plan sessions.

Excuses? Reasons? Why don’t farm families plan better for the transition of their business to the next generation? I’ll live forever! I’m too busy now. Why do families not discuss business transfer? Psychological (scared) “Can’t run without me” I’m too busy.” “I’ll do it tomorrow.” “I don’t want to hurt anyone’s feelings.” Class discussion on reasons why transition planning is seldom discussed. Nobody can replace me. Whose job is it?

Managing for Today and Tomorrow Will Increase your knowledge of the planning processes Offer tips for improved family communication Give you the tools and resources you need Connect you with a local network of farm women and professional service providers Reinforce the inter-relationships between succession, financial, estate and retirement planning.

Transition Plan Road Map Transfer Process Child Parent Divide Income Transfer Management Transfer Ownership Accomplishment Beginning Establishment Commitment Testing End Transfer Stages The stages and process for successful transition plans. Over the course of the next 4 meetings we will introduce you to the steps involved in developing a farm and ranch transition plan and give you the tools necessary to fit the pieces into a successful transition of the farm or ranch business. There are four distinct stages of a successful transition plan from the patriarch’s point of view …….. Testing the validity, based on the goals and strengths and weaknesses of the organization. Commitment to the plan by all parties involved Establishing and developing the succeeding generations management. Withdrawal of the preceding generation from day to day involvement and oversight of the farm or ranch business. In addition to the four steps of implementing the transition plan, three things need to occur along the way. Dividing the income of the current management and the succeeding Transferring the day to day and long term management responsibilities Transferring the ownership of the farm or ranch business assets from one generation to the next.