Involving family members in the operation without a solid plan can spell disaster
While it is tempting to turn your farm operation into a family business, bringing in family members without a solid plan can spell disaster. Jolene Brown, a family business consultant, says understanding how to run both family and business can set you up for success.
“In agriculture, we are above the level of production,” says Brown. “Today we are going to focus on people who work in agriculture.”
Instead of waiting for things to break down, Brown encourages farmers to get their businesses back up and running as soon as possible. Getting things done when the times are right allows you to have the tools to deal with things when the times are tough, she says.
When it comes to breaking up a family business, Brown points to four major mistakes.
1. Assuming all genetic relationships equal good working relationships
Brown says acceptance into a family should be unconditional, but acceptance into a business should be conditional and is not a birthright. No family member should assume that he or she is entitled to any share of the land or wealth unless it is earned.
A family business is also not a place to rehabilitate a family member. If he or she can’t have a job elsewhere, says Brown, why should he or she get a paycheck from you?
“You and I tolerate stuff from family members that we would never tolerate from another employee,” Brown said. “Here’s why: We have mothers and fathers who bring in the kids instead of leaders and managers who hire great people. As a business, we need to have leaders and managers who hire the right people, and leaders need to be the right leaders. ”
Brown emphasizes that she is not discouraging farmers from bringing their children or in-laws into the business, or handing over the business to them, but rather from thinking critically about who is best suited to take over. . It’s more important to think about the traits, upbringing, experiences and personality needed to make the farm a success than just handing over the management to the oldest son.
2. Believe that the company can financially support all family members who want to work together
When family members start to apply to join the family business, farmers need to consider whether it is really possible to pay them all. Brown says that when considering hiring a new employee, check your company’s financial ratios to see if you are financially capable of paying them.
“Don’t get someone in a financial mess and expect them to fix it,” Brown said. “When you hire people, make sure their salaries and compensation are cash flow, not equity. Nobody says, ‘I’m going to sell an acre or reduce the herd so I can pay you.’ You make sure that as you bring in people, it flows into the cash flow of the business.
3. Assume that others should change, but not themselves
Once you make the choice to be the leader of an operation, says Brown, you are no longer independent. The n ° 1 job of a leader is to replace himself, which requires compromises.
“If you told me you wanted the business to continue, that was an intentional choice,” says Brown. “You are not independent. It is not your way. It is in multiple ways.
4. Assume that a conversation is a contract
Just because something has been verbally promised to you doesn’t mean it legally guarantees it. If it’s not written down, it doesn’t exist, says Brown. When working in a business, not just a family business, it is imperative that you write everything down with signatures. From general financials to job descriptions, keeping things in writing clarifies everything.
Brown suggests that good businesses, no matter how close the family behind them, should not rely on hope and good faith promises as a business strategy, as this is a significant risk that can be avoid.
“How many years of blood, sweat and tears are you going to put into the business? Brown said. “Hoping that things will work out on their own.” Hoping that things go the way we want them to. Hoping the case can continue. Hope is not a good business strategy.
10 tools for success
Brown suggests that farmers develop the following 10 tools to help create a successful foundation for their family business now and when they start making the transition. Meet with family members to discuss, edit, and sign off to confirm that everyone is in agreement.
1. Mission statement. Who are you? What is your activity and what do you represent? When a consumer buys from you, what to expect?
2. Business plan. What is the structure of your business? Who reports to whom? Which parts of the business depend on what? What are the goals this year? What are the finances and succession plan for your business?
3. Questions for those who wish to join the company. A list of questions and education, experience and personality standards for family members who wish to join the business must meet.
4. Manage people. Who is responsible for what in the company? What is the division of responsibilities and how do they change as leadership evolves?
5. Code of conduct. A list of rules and expectations that all members of the company must follow, signed when they are hired.
6. A “contract” to communicate clear expectations. A document that describes intra-company communication expectations and communication best practices.
7. Conflict resolution. What are the best ways to defuse a situation? How do you solve a problem calmly and efficiently?
8. Assessment interview. How can employees improve? Where have employees been successful? How can you communicate this to them in an appropriate way?
9. Prerequisites for owning a family business. What qualities does a family member need to have in order to participate in the family business?
10. Purchase-sale contract. A legal document describing the rules for valuing assets and transferring ownership. It makes a will void.