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How to plan a graceful exit

Stephanie Plaster for Progressive Dairyman Published on 06 November 2018

During difficult economic conditions, farmers face many challenges that can lead to stress and anxiety about the future of their farm and family. When a farm ceases to turn a profit, and debt is piling up, it is time to examine what options are available to ease the burden.

An exit plan provides the opportunity for the farm to harvest the maximum amount of value from an enterprise no longer meeting economic needs or goals.

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An exit plan is a best management practice and is an essential part of a business plan. Every farm and business should have one. It is a risk management tool and a strategy to ensure the farmer has control of the ultimate outcome.

The plan sets the guidelines for when it is time to talk about making a change. Business, financial and personal goals are used to determine the timing and method of exiting. The future of the farm and the farm family depends on having a good exit strategy.

A planned, graceful exit from either the farm or farm enterprise can be done in stages and on the farmer’s terms. Building this exit strategy can help identify additional opportunities and help determine what can be done with the land and facilities if an exit were to occur.

It also allows the opportunity to define what will trigger the need to exit a given enterprise – and not necessarily the farm entirely.

Start with a team

The first step to building the plan is to establish a team and bring the right people to the table. This team will help identify the issues, prioritize them and develop a plan of action. The team will also hold everyone accountable to make sure the work is getting done.

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Examples of people who may be involved include owners, investors, key employees, accountants, attorneys, lenders, unsecured creditors and a facilitator. This group will differ from those at the table for production team meetings; however, production meetings should continue separately to maximize profit and minimize losses as the exit plan is developed and applied.

As part of the team, it is important for each member to participate when appropriate and to keep in mind what everyone’s purpose is. A trained facilitator, such as an extension agent, may help to ensure the agenda is developed and followed, the meetings run smoothly, the team accomplishes the necessary tasks and develops an action plan that is ultimately implemented and evaluated.

Meeting tips

There are a few tips to keep in mind to help these meetings run smoothly. It may take several meetings for participants to feel comfortable enough to accomplish the vision of where the farm is headed. Comfort takes time, and honestly may never happen. That’s OK. These are hard topics to discuss.

Communication is key. Remember, silence is seen as acceptance, so it is important for everyone to get the opportunity to speak and contribute to the plan. This is where having an experienced facilitator is critical.

Set family, business goals

The next step to building a successful exit plan is goal setting. Start by having each farm partner or spouse create three individual goals. These goals should then be shared and used to create three to five family goals and three to five farm business goals. These goals will be the basis for the exit plan. When the farm is no longer meeting these goals, it is time to start initiating the exit.

Exit plan: Answering the questions

After the goals for the farm and the family are established, the exit plan should address the following questions: What is the trigger situation? What needs to change? Do you and your family still want to farm? Where do you want/need to be in three months? Six months? One year? How do you get there? The answers to these questions will lead to a plan that is different for every farm. The team should be engaged in designing a plan to make sure it is realistic and achievable.

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The plan should be written down and implemented. This is a guide to help a farmer navigate through a transition, and it should be evaluated along the way and revised as necessary. It does not have to be carved in stone; it’s OK to make a mistake and change it.

Maintain a support system

The final piece to successfully building and implementing a farm exit plan is establishing and maintaining a support system. Change is not always easy. Exiting from the farm or farming enterprise is likely to be stressful and upsetting. It can lead people to feel like they are alone or they have failed.

A well-planned exit is not a failure; it can be a smart business decision. Maintaining friendships and relationships in the community will help ease the transition into the next venture.

Conclusion

Farms should take the time to build a strategy for a planned, graceful exit where the maximum value can be harvested from the enterprise. To do that, farmers – and the agriculture professionals working with them – should build a cohesive team, practice effective communication, set achievable goals, establish support systems, and implement and routinely evaluate the plan.

As Manitowoc County UW Extension agriculture agent Scott Gunderson recently said, “There is life after farming, after cows. Our job is to help farmers identify what that looks like.” end mark

Stephanie Plaster
  • Stephanie Plaster

  • Agriculture Educator
  • University of Wisconsin Extension
  • Ozaukee and Washington counties
  • Email Stephanie Plaster

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