A conversation with Randall Strode and Dale McClellan, two Farm Credit board members and agribusiness owners, about their respective succession plans proved full of adages, advice and the emotional strongholds that come with creating a succession plan that ensures the future of their family business.
A well-maintained succession plan is vital to business continuity and sustainability. With the inherent volatility of agriculture, it is never too early to create a succession plan.
Perusing articles about “Succession Planning 101” is an excellent place to start when preparing your succession plan. Perhaps less discussed is the humanity and emotion behind creating a succession plan, which is just as vital as the advice that a financial planner or legal counsel can provide.
A conversation with Randy Strode and Dale McClellan, two Farm Credit board members and agribusiness owners, about their respective succession plans yielded plenty of advice and the acknowledgment of the emotions that come with creating a succession plan to ensure the future of a family business.
Randall Strode is the owner and president of Apopka-based Agri-Starts, a leading supplier of plant tissue culture starter plants and services. Randy’s son, Ty, is Vice President and Marketing Director of the company, and also the successor of Agri-Starts.
Dale McClellan is the owner of Tampa-based M & B Dairy Products. One of the business concepts was to create a modern, environmentally sound dairy farm. His sons Leon and Daniel manage the farm in Lecanto and processing plant respectively, and his daughter-in-law Andrea (and Daniel’s wife) manages all administration and office tasks. They are the successors of M & B Dairy Products.
Q: What role does your family play in day-to-day operation?
Randy, Agri-Starts: When we started, all three of my sons pulled weeds and Vicki did office work. When we built our new lab, the entire family helped with electrical work. As years progressed, my middle son moved to Portland, Oregon to do carpentry work, and Vicki stopped doing office work when we hired Teri Goode, our administrative assistant. My son, Ty, showed an interest in the business and joined the company about 15 years ago doing odd jobs like delivering plants and unfreezing my computer. Since then, he has really embraced the company. He hired a terrific staff, and it is obvious that he be the beneficiary of my succession plan.
Dale, M & B Dairy Products: I’m the owner and president, but I play an advisory role to my two sons and my daughter-in-law. Leon is the farm manager, and oversees all operations and employees on our farm in Lecanto. Daniel manages our Tampa processing plant, where he oversees production, shipping and maintenance. Daniel’s wife, Andrea, also works at the plant managing the office, accounts receivable and payable, and any administrative staff we have. All three had to start from the bottom and work their way up, as it was very important that they learn the business as a whole.
Q: How did you approach creating a succession plan?
Randy: When I was in my 40s and 50s, succession planning wasn’t on my mind. Then Ty joined the company, and after about five years, he developed a passion for the business. If Ty didn’t show interest in the company, the solution was to sell the business. So in 2010, when the market was at a low point, I hired an attorney to gift Ty as much as the company that was legally possible at the time. But overall, my succession planning happened naturally and we planned as we needed. Just as the growth of the company was overwhelming, Ty took initiative to mitigate that load.
Dale: There are several factors one doesn’t anticipate when creating a succession plan for a business. When you’re young, you think you’ll live forever and you don’t know if your children will want to be involved. But it’s important to keep the conversation open. I’m preparing my children to run this company. We would talk about questions like, “If I got sick, could you do this? Would you want to?”
Q: What resources helped you during the succession planning process?
Randy: We hired an attorney who knew the ins-and-outs of estate planning. It’s very essential that they know the rules and regulations when it comes to transferring shares or ownership. I also immersed myself in articles in trade journals about the process.
Dale: The law firm we used has worked with my family for more than 70 years, it’s important to trust your legal counsel. Our preparation evolved throughout the years, but there’s always a plan in place in case something happened. My plan is also formed largely around the roles my successors play.
Andrea, M & B Products: When creating your succession plan, it’s important that the key players can fulfill their roles and not just hold a title. The three of us had to start at the bottom and work our way up, but we know our roles so well.
Q: When creating your plan, what challenges did you face?
Randy: So far, I have dealt with guilt about not working 10-12 hours a day. It’s an adjustment.
Ty, Agri-Starts: My dad and I have different skillsets that complement each other, and with him working less, I’ve had to compensate in the areas for which I didn’t have an affinity.
Dale: Accounting for my role – which has changed – in the plan. I used to run this entire operation, but now I advise Leon, Daniel and Andrea. Challenge also comes with trying to communicate what I know at my age, to someone much younger. Patience remains a challenge. I didn’t have a huge, master plan but instead threw my kids in the mix to see how they would adjust and grow.
Q: What would you tell someone with the succession planning process on the horizon?
Randy: Consult an estate planner, attorney, or someone who is well versed in the rules and laws. Keeping an open channel of communication between you and your successor is also important.
Dale: Make sure your successors understand your company. There’s solace in knowing my successors have passion for the company because I didn’t allow them to work here when they were young.
Andrea: Understand where everyone’s strengths lie.
Daniel, M & B Products: Be patient when learning the company.
Q: Additional tips/lessons learned:
Randy: The culture of the company needs to be understood by the successor. Ty is more cerebral, and I prefer a tactile way of working. I coached Ty’s soccer team for about a decade, and we developed a bond and understanding because of the time we spent together. There’s a mutual respect for skills I posses and he doesn’t, and vice versa.
Dale: Always be prepared. A few years ago, I got prostate cancer. I’m fine now, but it really opened my eyes to the reality and necessity of a succession plan.
Daniel: Approach the creation of the plan pragmatically, because not doing so changes the logic, how the family thinks and ultimately complicates the entire situation. Separate business from family.
From the successors:
Q: Playing a secondary role of an outside observer, what lessons did you learn from creating this plan?
Ty: We’ve met with corporate attorneys and everything is on paper, but every year the plan changes. So don’t set it and forget it. Constantly revisit the plan and make sure everything is up to date.
Q: When the time comes for you to build a succession plan, what will you keep in mind?
Ty: Our plan makes sense on paper, and we’ll see how reality aligns in the future and adjust accordingly. This is the first transfer and generational change we’ve had in our family, so it’s my chance to learn.
Leon, M & B Products: It’s hard to anticipate growth. I would love to double herd size, but it’s so hard to plan for that.
Daniel: Grow at a nice and healthy place to ensure a successful future succession plan.
Creating an effective succession plan for your business or farm reaches far beyond a simple checklist. Successors have to be identified, conversations need to happen, a channel of communication should be open between the business owner and their beneficiary.
As Ty Strode said, do not “set it and forget it.” Revisit and update the plan as the business evolves.
A succession plan may look different from one farm family to another, but it is important to have a plan. Farm Credit recommends consulting an attorney as your first step to securing your business for the future.