“Lack of planning will eventually adversely affect – if not even cause you to lose – all that you and your family have worked so hard to gain and preserve.”
Michelle Birschbach, a partner of Steimle Birschbach LLC based in Manitowoc, Wisconsin, shared this statement at FarmFirst Dairy Cooperative’s fourth annual meeting during their February Producer Discovery Workshops. The presentation included her list of “10 common perils” that she believes today’s dairy producers and their families need to consider to best prepare them for the future:
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Organize your agribusiness:
- Consider carefully how your agribusiness is structured. The type of structure, the number of entities and the purpose of each entity. Proper structuring can spread risk, aid with taxation strategies and even facilitate future succession.
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Buy-sell agreement:
- Get an agreement in place now that sets forth the terms by which one owner has the obligation or option to purchase, sell or transfer ownership interests to the other and under what terms. It is always better to get this in place prior to when it is actually needed.
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Contracts with third parties:
- Gone are the days of relying on a handshake. While a contract can be verbal, a written contract setting out all pertinent terms (who’s doing what, when, where and for how much) is nearly always preferable.
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Insurance:
- Numerous insurance policies are available to insure certain risks, and you should take the time to explore what is available and what is appropriate for your situation.
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Finance and credit:
- Take the time to determine what type of financing is needed and how you are going to obtain that financing. Your primary lender should be a key part of your team. Open communication is critical.
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Employees:
- Recruiting, maintaining and managing human resources is the hardest aspect of most small businesses. Follow the rules. Consider background checks, handbooks and confidentiality agreements.
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Mind your real estate:
- You must understand how your real estate is titled and the ramifications of that title. Be mindful that most contracts regarding real estate must be in writing to be enforceable. Do your due diligence when purchasing property.
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Estate planning:
- Certain estate planning documents are absolutely critical! You should have in place health care powers of attorney, financial powers of attorney and dispositions at death appropriate to your situation (whether via a will, a trust or other probate avoidance vehicle like a transfer on death deed).
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Long-term care:
- How do you plan on paying for long-term care (i.e., nursing home costs)? If you do not start planning early, you may have little options and may lose everything.
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Plan and communicate:
- Do not wait for things to happen. Do not react. Do anticipate, plan and communicate – now!
Start by gathering your team – attorney, accountant, financial advisor, insurance agents and lender. Plan early and be flexible. Seek assistance from your team and regularly meet. Listen. Encourage openness and honesty. Invest the time and money to do it right!
Most importantly, start now. Planning for the future is important to today and the decisions made from this moment on. The investment in your operation should include having a plan for its future. Communicate this plan with its future stakeholders to ensure it can continue to be a valuable investment. PD
Julie Martin is with FarmFirst Dairy Cooperative.
