Assets, Liabilities and Opportunities
In a discussion about succession and estate planning at the Ranching For Generations course earlier this year, a woman told me that she believed “we should leave our kids opportunities rather than things.” I think she’s right. Unfortunately, we often mistake things, for opportunities.
The classic example is leaving the ranch to your children so that they have an opportunity to ranch. I’ve got news for you. If the kids are smart and driven and want to ranch, they can ranch whether you leave them a ranch or not.
Consider a young couple who came to the Ranching for Profit School and spent the next decade struggling to make the family ranch work. After attending the school they made changes that improved the gross margin/unit, cut overhead costs and increased turnover, but it wasn’t enough. They needed more land, and finding anything of any size in their area to rent at a realistic price seemed impossible. They continued to rely on a full-time, off-ranch job to get by.
One day I asked them why they wanted to ranch. They said they wanted to work with land and livestock. They wanted to have autonomy to make decisions. They wanted to see the land improve and make a living doing it. They wanted to raise their kids around livestock and nature, probably the same reasons you’d give if I asked you why you ranch.
Knowing a little about how limited opportunities were in their area, I told them that they could have nearly all those things as a manager on someone else’s ranch. I don’t know if working for someone else would have seemed like giving up on their dream, or admitting defeat, but they continued to try to make it on their own.
A few years later when the couple took a position managing a large ranch in the same state. They said it was one of the best decisions they ever made. They are working with land and cattle. They have autonomy to make meaningful decisions. Although they need approval from the owner on big ticket items, they don’t have any of the financial risk (or stress) of trying to do it all on their own. They have a great home, are able to raise their kids in a ranch environment, and they don’t need an off-ranch job to make ends meet.
The point is that sometimes the thing we give someone, thinking it is an opportunity, may actually be a liability.
Please don’t misunderstand. I’m not suggesting we ought not leave our kids assets. If you want to keep the ranch in the family, that’s fine, but don’t fool yourself.
Consider an older couple I met who own a ranch that has never made a profit. It’s been subsidized by wealth accumulated from professional careers outside of agriculture. They intend to leave the ranch in equal shares to their children, some of whom have not talked to one another in years. Despite the dysfunction, one son is considering managing it so that his 13-year-old son can “have the opportunity to ranch when he grows up.”
Maybe I’m naïve, but the way I look at it the 13-year-old will have the opportunity to ranch if he really wants to, whether his grandparents leave his parents a share of the ranch or not and whether or not his father attempts to manage it until the son is ready to take it on. If the son does want to ranch, given the dysfunction of the business and the family, I wonder if this “asset” is really a “liability” that could turn the dream of ranching into a nightmare.
I think the woman at the Ranching For Generations course had it right. Let’s focus on leaving our kids opportunities, not things. And let’s be careful not to mistake assets for opportunities. As they can just as often turn out to be liabilities.