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Managing for Today and Tomorrow. Succession Planning Session Three Block three. Objectives. SWOT Analysis Uses of SWOT analysis Goals and SWOT SWOT exercise Overcoming barriers to successful transition plan The D’s Equal vs Fair treatment of contributors.

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managing for today and tomorrow

Managing for Today and Tomorrow

Succession Planning

Session Three

Block three

objectives
Objectives
  • SWOT Analysis
    • Uses of SWOT analysis
  • Goals and SWOT
  • SWOT exercise
  • Overcoming barriers to successful transition plan
    • The D’s
  • Equal vs Fair treatment of contributors
strengths weaknesses opportunities and threats swot analysis
Strengths, Weaknesses, Opportunities and Threats SWOTAnalysis
  • Strengths
  • Weaknesses
  • Opportunities
  • Threats
  • Uses of the SWOT
swot analysis strengths weaknesses opportunities and threats

SWOT AnalysisStrengths, Weaknesses, Opportunities and Threats

Hand out and Reference Material:

SWOT Analysis: A tool for making better business decisions

USDA-RMA, August, 2008

Farm-Risk-Plans.usda.gov

risk profiles barriers to successful transition plans
Risk ProfilesBarriers to Successful Transition Plans

YOUNG

MATURE

  • ambitious
  • low experience
  • new ideas
  • no time horizon
  • time to recover from mistakes
  • have little to lose
  • risk conscientious
  • lots of experience
  • established style
  • sees a horizon with a setting sun
  • little or no time to recover if losses occur
  • have a lot to lose
important d s
Important D’s

Death

Disability

Disaster

Divorce

Disagreement

important d s by generation
Important D’s by Generation

YOUNG

MATURE

Death

Divorce

Disability

Disagreement

Disaster

Dissolution

techniques to manage risk
Techniques to Manage Risk
  • Avoid
  • Reduce
  • Retain
  • Shift
  • Self Insure
areas to talk about
Areas to Talk About
  • Insurance
    • Liability/peril
    • Life
    • Disability
    • Crop & Livestock Insurance
  • Contracts
    • Leases
    • Production agreements
    • Prenuptials
    • Market sales contracts
    • Estate & retirement plans
  • Asset Management
    • How property is titled
  • Communications
    • Between family members/generations
    • Business associates
  • Modified behaviors
    • Business vs lifestyle
    • Separating business and family life
  • Financial records
    • Balance sheet
    • Cash flow
    • Income statement
    • Emergency cash funds
slide11

High

Severity of Impact

Low

Few

Many

Frequency of Events

Avoid

Shift

Retain

Self Insure

Reduce

Retain

Self Insure

Reduce

fair vs equal

Fair vs Equal

Issues of fairness

one perspective on fair vs equal

Wills

Understand how assets are transferred in probate

Identify farm or ranch heirs/managers

Do they want to continue

Communicate the transition plan

Put the transition plan into action

some tools to consider
Some Tools to Consider
  • Life Insurance
    • Its affordable, life insurance is purchased for off-farm heirs
    • On-farm heirs purchase life insurance on parents’ lives for buying out siblings
  • Partnership, LLC, Corporation
    • On-farm heir controls/manages the operation
    • All siblings share ownership
    • Operating entity owned by on-farm heir and land entity owned by all heirs
some tools to consider1
Some Tools to Consider
  • Off farm heirs understand and agree to inherit less, in order to transition a viable farm or ranch business
  • Shared appreciation agreement
    • If the on-farm heir sell real estate within a specified time, off-farm heirs share in appreciation
  • Real Estate divided
    • Long term leases
    • On farm heir has first right of refusal is off-farm heirs sell
bench marking your progress
Bench Marking Your Progress

At this point can you answer yes to the following questions?

  • Are the parents ready for a partner?
  • How committed is the child to farming?
  • Is the business large enough?
  • Can you live and work together?
  • Are the non farming children supportive?