Is it “Family Farm” or Family Firm”? Which one matters the most?

Today we are going to deal with name calling that surrounds this business of dairy farming. Based on drive-by impressions, some non-farmers call dairies “Factory Farms”. “Family Farm” which is somewhat more positively perceived, is usually only applied to small farms. If said small farms are particularly successful, they too are in danger of sliding into the “Factory Farm” category. For responsible dairy families the new buzzword is becoming, “Family Firm” and it’s turning around the negative tales which previously resulted from unsuccessful family negotiations. For those choosing this model of business farming success, the “Family Firm” provides a strong foundation for generations who choose to work together. It also avoids the quicksand that lack of succession planning causes some dairy families to fall into. Being unprepared literally sucks the life out of the family and sinks the hopes of continued farming for the next generation.

What Name Does Your Family Choose to Work Under?

You might think that choosing between two names is the least of the challenges facing your dairy farming family. However, if one generation is working under the lifestyle-status-quo category and another is all-business-all- the time (not to mention the third family party who sees the farm merely as a paycheck for funding “real” life), the conflict is going to affect not only the family name but the family dairy profitability.

The first thing to get out of the way, is how the family feels about profitability. There are some who feel profitability and a business focus could negatively impact how they feel about dairy farming. Others feel it only makes sense to continually improve the business processes to improve the product (milk) and the cows that produce it. In the end the choice you make needs to be the one that gives all family members a strong sense of purpose, shared values and mutual goals for the dairy.

“Family businesses are neither families nor companies but the best and worst of both”

The above statement is true of family businesses the world over. When families work together they go into it head first sometimes… heart first all the time. And it isn’t too long until hard heads and cold hearts meet at the board room or kitchen table. What sometimes gets lost in the shuffle is that a family dairy farm isn’t an entitlement due to birth. It’s work. It’s ownership. Yes and, hopefully, there will be profits but there is also involvement, hard work and responsibility. The statistic that often gets lost, regardless of what side of the family farm fence you are standing on, is the fact that we are trying to fit 21^st century farming into 20^th century of even 19^th Century “idea” of farming. This romantic notion must give way to a business-like approach or we will see the end of farming all together.

“Are you already Behind the Late Ball?”

Does your dairy farm have a clear succession plan in place? Do all family members know and agree with the details. If asked, would they be able to clearly outline the important points? Would there be major differences in what they thought was a given? Whenever families work together, there can be different expectations of different generations. If the generations are the same, there can still be troublesome perceptions of who is “more equal”, when it comes to sharing the wealth. Sometimes questions arise about “when” a succession plan should come into play, of even “if” one is needed. There are some dairy farmers who have no desire to stop their life’s work, regardless of the needs, wants and necessities of those who also are necessary to the profitable functioning of the dairy farm. Others suddenly see time winding down and want to get out ….now!! Sit down. Get it on paper. It quite likely won’t be right on the first run through. Work it out. You wouldn’t leave the details of breeding feeding and caring for the dairy herd up to chance. Don’t leave your succession planning there either. (To consider these concepts further refer to the Bullvine article, “Farm Succession: Which Exit is Yours?”

A Family Firm Needs to be Healthy, Wealthy and Wise

When considering the assets of a Family Dairy Firm, it doesn’t start and end with an accounting of the cows, machinery, buildings and land. Of course, the first tally is that of the family. Each member brings unique talents and strengths to the business. There can be a variety of education, work and life experiences that add very real value to the business. If there is a crucial element missing, it’s never too late to do some studying. In these rapidly changing times, dairy learning should be ongoing, voluntary and self-motivated. Remember this quote, “Commit yourself to lifelong learning. The most valuable asset you’ll ever have is your mind and what you put into it.” (Brian Tracy – Canadian author and motivator)

When multi-generations work together health is a factor. Health or health issues impact not only the day to day operation but also how modifications – technology and behavioral – will affect the ongoing functioning of the dairy. Aging can’t be avoided. Health conditions can strike young and old alike. Be prepared to make changes that keep the operation operating. All firms — country dairy or city conglomerate—must deal with their human resources responsibly.

What Makes the Family Firm Unique to Dairy Farming?

What distinguishes family businesses, of course, is family. Adding family values, loyalty, pride, cohesiveness, meaning and all the other strengths of family to the passion for the dairy industry provides support not available to many purely corporate enterprises. Today’s economy continues to chew up and spit out whole industries. Technology is evolving at unprecedented rates. Global competition and instantaneous communication have turned the competitive advantage of secrecy upside down. Opportunities in other industries woo well-educated offspring off the farm. Add to this the increasing social and cultural pressures that make successful family life challenging, and targeting a 30% generational survival rate for the family farm is incredible testimony to the positive power of family when applied to the family dairy farm.

Who Owns the Family Firm? Who Owns the Farm? Who’s Getting Rich?

Maintaining family control of the dairy operation can be difficult. The increasing size of the family dictates that there must be expansion and growth. Raising fresh capital or expanding revenue sources must be addressed. These are further sources of potential conflict. Should the family keep control? Should capital be raised outside the family? If steady long-term growth is the goal what happens if one or more family members need cash now?

Don’t Derail Your Family Success with Family Fighting

Get a clear handle on the debt situation. Only then will you be able to put your energies into moving forward. Knowing the problem isn’t your biggest hurdle. Avoiding dealing with it is.

Treat each other with respect. Families become very familiar with each other’s strengths and weaknesses. Being able to push buttons is not a license to do so. Some families develop an adult version of “time out” so that words said in the heat of emotion don’t prevent the family from dealing with the problem. Walking away until cooler heads can prevail is a lot better than making any problem into a situation that is insurmountable.

Everyone participates. A family firm cannot build on the labor and responsibility of one or two. It takes a whole family bringing something to the business to make it a successful family farm. Farming is a legacy. What it isn’t is a gift that is passed on by entitlement only. “Everyone involved in the succession should be able to point to what they bring to the table that will allow the dairy operation to continue successfully”.

Dairy farm families must decide, “Does the family serve the business, or does the business serve the family.”

This could be the most important discussion of all .Work out what the business owes to each generation. These are tough conversations but nothing goes forward or continues, until the answers are clear— and accepted by everyone.

For more information on the above five succession complications, see ‘Five Stingers that You want to Avoid’ in the Bullvine article, “Farm Succession: Kicking the Hornet’s Nest?”

Building a Firm Foundation for the Family Farm

Family farms can go under for many reasons beyond the day to day operation:

Conflicts over money;
Seeing management weakness through rose colored glasses;
Infighting over who’s the boss
Squabbles about the succession of power from one generation to the next.

Family farms that survive for many generations make sure that every generation is empowered with a strong sense of purpose. Over decades, they develop oral and written agreements that address issues that affect the longevity and profitability of the dairy operation. They continually update the roles and responsibilities of all family members who are involved in the business. It is clearly stated who can and cannot derive profit from the dairy farm. The continual development and interpretation of these agreements is the key that turns the dairy firm into a successful one or one that fails.

The Bullvine Bottom Line

Dairy farming is not a sure thing. Family farms and Family firms need clear rules and guidelines to build on. Success often depends on a shared long-term vision coupled with hard work every single day. Almost all dairies started out at one time as family businesses. Those that master the challenges of this business model will endure and prosper for generations. The work involved in developing the dairy firm is complex, extensive and never-ending. However, when the name-calling is over, it is clear that whether it’s family farm or family firm … the most important part of the equation to focus on is “FAMILY”!