Is Your Farm Family First or Business First?
Have you ever thought about what kind of business approach your farm operation has adopted? Does the farm place emphasis on “Family First” or “Business First”? It is important that the members of the family farm understand the difference between the two approaches in order develop a structure that is effective in meeting the farm’s goals while being respectful of the family’s values and helping to identify future problems before they arise.
The differences between “Family First” and “Business First” approaches are very distinct and most operations float between the two in different areas:
|Area||Family First||Business First|
|Employment||Everyone is welcome||Business needs and individual qualifications|
|Compensation||Equal or close for everyone||Contribution- and performance-based|
|Perks||Everyone benefits||Based on job and compensation agreement|
|Authority||Mom & Dad||Organization chart with business hierarchy|
|Accountability||Extremes (little to lots)||Management right to fire|
|Governance/Decision-Making||Family concensus||Board or management team|
The response from family members about what type of farm business they are in can often vary depending on age, gender, level of education, and length of time working on the farm or not on the farm. It is important that farm families identify and decide how to deal with these areas. Rather than use on or the other approach, it is generally best to develop a hybrid approach called Family Enterprise, which may look like the following:
|Employment||Opportunities created depending on needs; education and experience are planned|
|Compensation||Closer alignment with responsibilities; may enable share purchase one day|
|Perks||Earned based on family employment policy|
|Authority||Equal roles for those with high degree of competency|
|Shareholders||Education for future shareholders; opportunity for passive ownership|
|Governance/Decision-Making||Family and outside board, family council|
Each farm and family are unique, so each farm operation will have a different approach. The Agriculture Advisors at Avail CPA can assist your farm operation in the development of guidelines and principals for how to operate in your unique structure while identifying future problems before they arise and facilitate strategy sessions to help tackle tough issues already existing in your family farm business.