In this episode of the DFB Dream Maker Podcast, we talk with Chief Lending Officer Matt Bennett of Dream First Bank ’s Garden City branch. He’s been in banking for over 20 years and joined us to talk about the Jolene Brown seminar we held last year. There were a lot of good takeaways from our pre-Thanksgiving seminar.
In this conversation, we cover three major topics:
- Roadblocks to future planning
- Great advice for Farm Businesses
- The importance of starting somewhere
Let’s talk about each topic in more detail.
Roadblocks to Planning for the Future
Jolene is a professional speaker, author, and farmer who has personal experience helping families navigate the family farm. At the seminar, she shared several of the challenges families face as they plan for the future. First, she noted how people leave the family business and then went into why families fail to plan for transitions.
How People Leave the Family Business
Jolene spoke about the “Deadly D’s”: death, disillusionment, debt, divorce, disability, drugs, etc. Those are some of the ways that people leave family businesses but it’s important to plan how to buy someone out and not bring down the entire business in the process. That’s why having a Buy-Sell Agreement is important and everyone involved in the family farm should sign it.
Fear of Confrontation
Everyone is different, and when emotions get involved, it’s even more difficult. Here at the bank, we’re going through the Crucial Conversations book, and one of the things they talk about is emotion. When you get emotions and adrenaline involved, your mind doesn’t work as well.
“Especially when you have siblings involved. Most people who grew up with their siblings, you love them to death but you fight like cats and dogs,” Matt affirmed.
Fear of Being Replaced
One of the points Matt made was that, despite Jolene’s statement that, “The number one job of a leader is to replace yourself,” there’s a fear of being replaced. People can also be afraid of doing too good a job at replacing themselves and ending up 50 years old without a job.
Part of the fear is that many people are defined by what they do. You could think, “I don’t know what to do if I’m not a farmer,” or “If I’m not a farmer, then what am I?” Thinking in this way can set up a roadblock to your planning process.
“Farmers are notorious for not taking the vacations they should. It could be a bit scary (to think) ‘I’m going to transition, but what am I going to do?’” Matt said.
Lack of Communication
There’s plenty to talk about when it comes to family farms. “There (are) a lot of moving parts to farms, especially the ones that have livestock involved or sideline businesses.”
When there is no communication, the survivors have to scramble to find out how to run it all. “When one spouse goes, a lot of tough things get forced onto the remaining spouse - a lot of big decisions.” That’s not fair to them or to the children who are left.
Not Being As Organized as Needed
People should write down where the safety deposit box keys are, their online banking passwords, and all the other things that people deal with every day. Some of these may include:
- CD’s
- Life insurance policies
- Legal estate plans
- Long-term care insurance
- Stock accounts
It’s important to write these down and have a conversation about them. Matt agreed, “People aren’t mind readers.”
Getting Hung Up on Details
Sometimes people can get partly through the process and end up with only half a plan because they got bogged down by the details of the process.
My cousin is an attorney, so I shared some additional insight I got by talking with him.“A lot of times the biggest hangup is how to handle the custody with minor kids. A lot of them get to that part and can’t make a decision. They sit there, and they get hung up on little ideas, but done is better than perfect. Just pick something and change it as you go.”
Good Advice for Farm Businesses
Jolene had stellar advice for farm businesses, and it all starts with a shift in perspective. She explained why having a business-first family is actually helpful and good for family members, and then went on with more specific advice.
Business-First Family vs. Family-First Business
The first thing Jolene made clear was that family farms should change their perspective. Rather than being a family-first business, they need to become a business-first family. This shift is required if you want to truly honor your family. Care enough to get the business right. The story of The Three Little Pigs shows the benefit of planning for the future, brick by brick.
“A lot of times, the next generation does what dad or grandpa did, (saying) ‘That’s the way we’ve always done it’... generally, people don’t like confrontation, so although it’s not the best thing, the easiest thing is to not say anything when it comes to transition or estate planning,” Matt said. He continued, “It’s great to have a family involved, but if you don’t run it like a business, at some point, you won’t have a business left.”
There should be structure and rules involved in planning the family business if the farm is to continue on. Many families don’t want to rock the boat and conversations are a contract. There should be an exit strategy or exit plan in place for those who want to leave the family business, to keep it running in case one of the deadly D’s happens.
It’s important to separate family members from the business and take an objective look to see if they’re a good fit. “Some people think, ‘If I manage it like a business and this kid isn’t gonna work,’ the fear is that they’re going to isolate them from the rest of the family. That’s not the intention,” Matt said that affirming family is important. “(They’re) still part of the family, and (they’re) gonna love (them) unconditionally. (They) can come to (dinner) but it’s going to be different than the business side of things.”
She also talked about how there should be an exit strategy/exit plan in place for people in the family business so that no one is taken by surprise. This comes in the form of a buy/sell agreement.
Thinking of Coming Back? Work Elsewhere First
In some situations, a college student will return home and ask to work on the farm again. Jolene is adamant that those returning to the farm go work for someone else for two or three years rather than going straight back to farm work.
There’s a lot of wisdom in having a family member work for a different employer. “They’re going to hold you accountable and if you show up late, they’re not going to tolerate that… I’m a true believer in that. It instills work ethic, you’re under more scrutiny, and you learn things you can bring back to your family,” Matt said.
Not only that, but it gives them a better idea of what to expect in terms of payment, treatment, etc. They’ll have a better idea what wages they should be paid and how things should be run - so there will be a clearer understanding of the family business if they do choose to return.
Buy a Home So You Have Something of Your Own
Rather than having a farm-provided house, Jolene urges everyone to own their own home. This gives you a sense of security. It’s important to have a place to live in case something happens to the farm, or if you decide to go another direction. If you are no longer able to work the farm, you don’t want to put that on your spouse. You should have your own place.
“The younger generation (lives) in a house that’s provided by the parents on the farm. Eventually, they may own it, but it’s usually later on in their careers,” Matt observed. Buying their own home can also be instrumental in teaching them what to expect from a home.
“Some of the houses aren’t up to snuff, and some (are) really nice,” I noticed, commenting that both sides of the spectrum can give an unbalanced view of their property. Owning a home instead of having one provided by the farm will give people a more balanced idea of what a home should look like.
Plan it Out in Advance: Think Strategically
Think about what everyone wants and what they’re doing. Sit back and think about the long term. There are several areas to consider:
- Employee compensation. This involves salary, provided vehicles/housing/gas, health insurance, etc
- Exit plans. The Buy/Sell Agreement should be signed by everyone involved in the business, along with a will, provided passwords, etc - anything someone will need to know in order to continue running the business smoothly.
- Business plans. Jolene talked about how there are four areas of the business that should be well-defined. There should be a person responsible for each aspect of running the business. In addition to that, everyone should know who does the work, who to consult about it, and who to inform about it. Creating an “org chart/management chart” enables there to be total clarity and defined expectations.
Just Get Started!
There’s a lot of information in this podcast, but the number one thing we want you to take away from it is to get started! Don’t be shy about telling everyone what you want the farm to be, what your intentions are, and don’t make your kids guess what you want it to be.
If you need someone to talk to, we’ll help you find the experts to execute your plans. We’re always here for you at Dream First Bank of Syracuse - just stop by one of our many locations or give us a call if you need anything!