Dave Specht discusses the importance of communication in tough subjects
When the father died unexpectedly, the family lawyer was left to relay to the rest of the family how his estate was to be divided. The sister, who worked as a receptionist at the business, received half the estate; his wife received the other half. The son, who also worked in the business, received nothing. A few months later, the son quit the family business, started his own down the street, and took all the clients with him. The mother and sister lost the business, and relationships between the surviving family members were severed.
“Is that what the father intended to happen?” Dave Specht asked a group of women during the 27th Annual Nebraska Women In Agriculture Conference in Kearney, NE. “I am sure that was not his intention,” Specht said to a room of stunned, silent women. “If it was, he must have been really sick.”
Specht, who works with farm and ranch families as a family business management consultant, spoke of the woman’s influence, which he feels is key in generational business transitions. Specht told the group of nearly 100 women how important it is to have some type of generational transitional plan in place. “Do something,” he encouraged. “If you leave here without doing something, you have failed.”
“A woman’s influence is the key to generational transitional farms,” he continued. “Many times, women are able to force some of the communication that needs to happen. Every family has its challenges in a generational transition, and every family is unique. Don’t leave the attorney to tell the family what dad’s intentions are for the business. Communication is so important to help preserve the family business and family relationships,” he explained.
It is important to have a contingency plan for ownership in case someone should pass away, Specht said. “If you don’t want to work with the other owners if something happens to your spouse, then a plan needs to be in place detailing how you plan to buy them out, or how they will buy you out,” he said. A management contingency plan also needs to be in place detailing who will take over the management and the decisions that need to be made. “Look at the things that only one person in the business knows how to do, and consider doing some cross-training,” he said.
Specht said it is important that others know what the generational business transition is. “It is also important the employees know what the plan is for the business once you’re gone to put them at ease,” he added.
When an owner passes away, it affects a lot of people in the business, Specht said. Family members, owners, active workers, non-participating owners, non-family owners that work in the business and have ownership, family members that work in the business but have no ownership, family members with ownership, and non-family employees with no ownership will all be impacted by the generational business transition.
Specht said most business owners don’t like to discuss what will happen to their business when they are gone, but communication is vital. Specht said when working on a succession plan, he believes it is important to get input from all family members who will be affected by that plan, whether that input is used or not. “Facilitate conversation,” Specht encouraged. “Many owners ask themselves – “Does anyone care about the farm as much as I do?, What would I do if I didn’t work the farm?, Is the next generation prepared to inherit the farm?, Do my inheritors realize what I had to go through to build up this farm?”
Specht said it is also difficult to determine how to distribute assets when one child stays on the farm expecting to take over one day, while others move to the city to pursue off-farm employment. “Is it fair to distribute the farm equally among the children, or should the child who stayed to work the farm and put their own sweat and blood into building it up inherit more?” he asked. Specht said it is important that each child is consulted about the future of the farm and what they expect, even if you can’t give them what they want.
“It is important to ask the next generation for their input, and find out what their goals and aspirations are,” he said. “It is important to hear everyone’s voice, even if it isn’t possible to accommodate everyone. By not asking, you could make things a lot worse. The goal is to eradicate secrecy, which I consider a ticking time bomb that will destroy family relationships,” he said.
A well established succession plan also involves key people working together, Specht said. The plan should be coordinated with the owner(s), an attorney, a CPA, an insurance advisor, a financial advisor and anyone else deemed important. “You can’t afford to have advisors who work on separate islands,” he stated. “It is very important they all work together.”
Once an owner determines how he wants to pass on his estate, that information needs to be documented, Specht said. “Once it is on paper, it is important that someone knows where it is at,” he said.