Annie’s Project: Helping to sustain family businesses
April 1, 2011
According to the 2007 USDA Census of Agriculture, family-owned businesses tend to have relatively short life spans. One-third of family businesses survive to the second generation, and only one in ten survive to the third generation.
“Approximately 40 percent of U.S. family-owned businesses are currently transitioning to the next generation,” said Ann Price, Hand County Extension Educator located in Miller, SD. “Many couples underestimate the impact a business will have on their marriage, family relationships, time and household finances.”
Living and working alongside family members can be a complicated business, and Price offered some advice on this topic during a weekly meeting of local farm women participating in Annie’s Project. This program is an educational forum dedicated to strengthening women’s roles in the modern farm enterprise with classes being taught in 22 states. The foundation of this program was inspired by a woman named Annie who grew up in a small town in northern Illinois. Her goal was to marry a farmer, and she did. Annie spent her lifetime learning how to be an involved business partner alongside her husband. Annie’s Project takes her experiences and shares it with farm women living and working in a complex business.
The program consists of six classes ranging in topics such as estate planning, record keeping, business marketing and working together as a family.
“When families work together, they take the family system and lay it on top of their business, creating all kinds of problems,” said Price. “There is a balance between having a happy, healthy family and a profitable, effective business. When you live and work on a ranch, you can’t leave work at the office and go home. The house is often ranch headquarters, and that can make things complicated. However, there are ways to work together to minimize the challenges.”
One of the important ways to reduce family and business obstacles, is to make a critical distinction about where priorities must rest. This isn’t something that’s black and white.
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“At times, the family needs to come first, and sometimes this is a detriment to the business,” explained Price. “At other times, a profit-driven business can cause problems for the family unit. Finding that happy medium between the two is where families need to strive to be.”
It’s important for ranching families to understand the dynamics of their own kin, as well as be on the same page for where the business is headed.
“Family businesses are unique,” admitted Price. “Transferring the business from one generation to the next can be extremely tough, especially when the roles of the family and the business get mixed up. It’s important to ask your family members what roles they play in the business to help decide how decisions are made.”
There are a few different roles family members play, including: the gatekeeper; the influencer; and the user. Often considered the peace maker, the “gatekeeper” regulates the flow of information and seeks alternative information. The “influencer” is typically the manager or owner and leverages decisions based on experience, position or expertise. Finally, the “user” takes the information from the influencer and evaluates it after decisions are made.
“To help balance the power among the gatekeeper, influencer and user, ranching families can use job descriptions,” said Price. “Establishing these descriptions can help develop a sense of identity for family members. Outdated roles can hurt a business and help make the transition from one generation to another a little bit easier.”
Price recommended that family members define the roles specific to their strengths instead of assigning default roles based on stereotypes. For example, one member of the family may be spending most of their time feeding cattle, when they would prefer to focus on baling hay or marketing the crops.
“Having family members in a business doesn’t have to be a struggle,” said Price. “The advantages are that family members are committed to the ranch, they understand the business and they see it as an extension of family.”
To have a successful integration of multiple generations on a farm or ranch, family members must be involved in short- and intermediate-term money management, as well as long-term financial goals.
“Failure to involve family members in financial management decisions can lead to decreased participation, commitment, agreement and understanding,” concluded Price. “The key to success from the dinner table to the business table is to increase your knowledge and plan for the future.”
A happy family and a profitable business can be achieved in a multi-generation ranch. Producers can find success in both areas with defined roles, clear goals and a strong commitment to working together to maintain a sustainable operation for the future.