The Ranch Business Time Bomb

by Dallas Mount

Abandoned house

Think of a ranch business you know of, that is no longer in business. Now I want you to think of the underlying cause for that business no longer being around. Was it related to production? Did the cows not breed, the calves weren’t big enough to bring in decent money or was the death loss too great? Was it grazing related? Did weeds take over, all the grass left and the soil blew away? Was it related to economics? Was there no way to structure the business so that it made an economic profit or at least met the cash flow requirements of ownership? Or, was it related to people issues? Did distrust or resentment develop among the key people, was there a lack of direction, an unwillingness to relinquish control, did the business tear itself apart from the inside out?  

I often ask this question when I have the opportunity to speak with larger groups and ask for a show of hands when I hit on the key problem. A few hands usually come up during grazing and economics but an overwhelming number of hands come up when we get to people. Unfortunately, this is the reason why many family businesses don’t continue past 2 or 3 generations. 

This is the tragedy of American agriculture. It isn’t that we aren’t hard working or smart. We are very hard working and there are plenty of smart, innovative and motivated people ready to lead the business. The tragedy is we aren’t comfortable having the important conversations that establish a shared vision, build trust, and find ways to pass on or step into significant roles. If we captured this in one word that word would be succession. I’m not talking about who gets what when someone dies. I’m talking about management succession or succession of the business leadership.  

Thoughts and stress around succession too often dominate our creative headspace. The current generation is worried about how they are going to meet all the current demands of the business and create opportunities for the next generation with some level of fairness between the kids. The incoming generation is thinking about long term security. If they choose this career path, what is the future for their family? If they come home to work for a meager wage, will they have to buy out cousins and siblings at tomorrow’s land prices? What kind of opportunities will they have, to grow a part of the business that they can own?  

Creating clarity around these questions is an absolute must for all family businesses. Finding the courage and skill to have these conversations in productive ways is difficult but achievable. At the Ranching for Profit School we touch on these topics and give participants useful tools to make progress on these. However, we realize there is more work to do in this area.  

I’m excited to announce that after a few years in the making, RMC will be hosting a 3-day family business succession intensive, Ranching for Generations September 29 – October 1, 2021 in Cheyenne, WY. This is an opportunity to dive-in-deep on these questions and leave with a plan for your business. Dave Pratt has taken the lead on developing the curriculum and will be teaching the course. The Ranching for Generations Succession Intensive will challenge participants with key questions around mission, vision, roles, accountability, money, timing, communication and more. Participants will be on site with many other family ranch businesses also navigating this critical juncture and the course is structured to maximize networking. We expect the class to fill as we are limiting it to 48 participants. Registration is structured to encourage participation from multiple key stakeholders in a business and at least 1 person attending must be an alumni of the Ranching for Profit School. One enrollment of $2,000 covers the first two people from your business and each additional person is only $500. Registration and additional information can be found here.

While I was in Australia a few years ago, I remember a car ride visiting with an operator I greatly admired. He was describing a 2-year process with professionals that they had just completed and how much they had invested in getting the succession piece of their business in place. I remarked that that was a significant investment of both capital and time. He responded firmly, “If I don’t get this right, then everything else I’ve done was wasted. I’ve got to get this right!” While it might be overstating it to say “everything I’ve done was wasted”, he is correct in that getting the succession piece right is critical. Don’t let succession be the time bomb that blows up your ranch business.

4 Responses to “The Ranch Business Time Bomb”

June 09, 2021 at 6:11 am, Pete Weisenberger said:

Excellent…well stated, Dallas.
This cuts to the heart of the issues facing us, not only in agriculture, but our modern culture and society as well.
Thanks, Pete

Reply

June 09, 2021 at 7:06 am, David Bair said:

I agree whole heartedly. At the age of 50 I’ve been at the helm for all of 3 years. Because my dad couldn’t let go. I have a 19 year old son that thinks he wants to take over some day. It’s time for my wife and I to start the succession piece for our farm. I’ve fought too hard for too long to allow it to fail now. I grew up on this farm and we nearly lost it when I was a teen. Back then I swore that I was going to save this thing. That’s how committed I am to this. I don’t want to be the reason it fails.

Reply

June 09, 2021 at 7:40 am, jphaskell said:

Great article, very well written. Thank you!

Reply

June 09, 2021 at 9:32 am, Save Ag said:

Our family picture and that of some relatives is fine. One branch is a mess that will likely result in sale of the property. In California, our biggest fears are property tax changes with the loss of many Prop.13 protections due to a measure put forth by the Board of Realtors designed to increase sales. This could result in property taxes being more than gross income from livestock. And the possibility of taxes due on stepped up basis at death and a lowered death tax exemption amount. A year ago everything was looking good from a tax standpoint

Reply

Leave a Reply to Save Ag Cancel reply

Your email address will not be published. Required fields are marked *