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Managing for Today and Tomorrow

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

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  1. Managing for Today and Tomorrow Succession Planning Session Three Block three

  2. 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

  3. Strengths, Weaknesses, Opportunities and Threats SWOTAnalysis • Strengths • Weaknesses • Opportunities • Threats • Uses of the SWOT

  4. 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

  5. Risk and BarriersTo Successful Transition Plans

  6. 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

  7. Important D’s Death Disability Disaster Divorce Disagreement

  8. Important D’s by Generation YOUNG MATURE Death Divorce Disability Disagreement Disaster Dissolution

  9. Techniques to Manage Risk • Avoid • Reduce • Retain • Shift • Self Insure

  10. 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

  11. High Severity of Impact Low Few Many Frequency of Events Avoid Shift Retain Self Insure Reduce Retain Self Insure Reduce

  12. 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

  13. 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

  14. 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

  15. 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?

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