Legacy Planning

3 Tips To Make Sure Your Strategy Is Driving Innovation

Mon, 13 Jan 2025 20:29:30 GMT

At the beginning of the year, many managers begin financial projections and resource planning. While doing this work, I’ve seen too many leaders confuse tactics for strategy. Implementation planning around your strategy is about tactics, and strategy sets the nature and direction of your business, defines your vision and determines how to differentiate yourself in the marketplace.

You need to ensure three key areas of strategy have been addressed before implementing tactics crosses your mind:

1. Vision
Vision is your picture of the future for your business, not numerical targets. It defines what success looks like and serves as a guide for decision-making.

How well-defined is your vision?
Can your team articulate it effectively?

To create a future-focused, achievable blueprint, you can use collaborative workshops, customer feedback, scenario planning or a one-on-one visioning session with a strategic growth coach.

2. Marketplace Divergence
A robust strategy identifies how you stand apart. Conduct third-party interviews with key customers to identify your points of:

Competitive uniqueness
Advantage
Equality
Weakness

Dollarize the unique value you bring to your customer. Validate your claims with examples and testimonials from customer depth interviews.

3. Innovation
Innovation keeps you and your business ahead of the curve. Epoch Times recently reported more than 2,000 CEOs of larger companies resigned last year. Many, if not most, had failed due to stagnant innovation.

Regularly assess if your business is adapting to increased competition and changing customer needs. Create a process for vetting and implementing new ideas that align with your strategic vision.

Implementing Strategy
As your strategy becomes ever clearer, continually refine your implementation planning. Here are some steps:

Prioritize Constraints and Opportunities:
Find areas with the highest potential to grow the business.
Customer Segmentation:
Rank customers by profits and potential growth, and estimate growth potential.
Untapped Potential:
I am conducting a survey of CEOs, and the 70 replies I’ve received so far have revealed:
- Avg. company revenue: $38M
- Avg. untapped growth potential with existing customers: 65% and $36M
- Total potential growth: $2.5B across respondents

Where to Start
The first steps in strategy and self-assessment often fund the next investments in growth initiatives.

If you want to assess and confirm your business’ growth potential, then call me for a pro bono strategic thinking coaching session. Privately, we can prioritize growth levers and identify blind spots.

A third-party assessment of your strategy doesn’t just pay for itself. It also sets the stage for your long-term success.

Mark Faust
(513) 621-8000
mark@em1990.com
@markfaustsr

How To Get The Most Out Of A Business Sale

Fri, 01 Nov 2024 13:00:00 GMT

Exit planning is more than just preparing to walk away from the business. It’s about crafting a compelling narrative that shows where the company has been and where it’s headed. In preparing to sell, business owners need to assess levers that unlock incremental value. This includes demonstrating a clear growth trajectory, including expansion opportunities, to potential buyers.

A crucial aspect of this preparation is cleaning up financials. Business owners must ensure they have solid financial statements that justify a business’ valuation. This often involves seeking a third-party audit to verify financial measures such as EBITDA (earnings before interest, taxes, depreciation and amortization) and confirm the quality of earnings. Streamlining operations to optimize earnings is also key as buyers look for operational efficiency and profitability.

Consider Personal and Business Planning
As essential as it is to prepare the business for sale, it’s equally important for owners to engage in thorough financial planning. Consider your personal life objectives and financial needs post-sale. What do you want to do with the proceeds? What are your long-term financial goals, and how much do you truly need? Understanding these objectives early on ensures you’re fully prepared for life after the sale.

On the business side, preparing for a sale includes deciding whether to use a business broker or investment banker. The choice will depend on the company’s size. For businesses valued at less than $5 million, a business broker may be the best option. Brokers typically market to a broad audience and negotiate with a single buyer. For larger companies—especially those with valuations exceeding $15 million—a controlled auction process involving an investment banker is often more suitable. The banker contacts potential buyers and creates a competitive bidding environment with multiple phases and rounds of negotiations.

Controlled Auction Process and Due Diligence
In a controlled auction, an investment banker helps the business owner develop a compelling narrative and reach out to potential buyers. The auction process usually starts with a teaser—a brief document describing the business while keeping its identity confidential. Interested buyers must sign nondisclosure agreements before receiving a detailed confidential information memorandum, which outlines the business’ financials, operations and growth opportunities.

From there, buyers submit an indication of interest to articulate their interest and ability to meet the seller’s expectations. The top potential buyers then submit a letter of intent. Due diligence follows for 60 days to 90 days as the company’s financials, operations and legal documents undergo inspection.

The Role of Culture & Terms
Beyond the financial aspects, potential buyers consider the company’s culture and how well it aligns with their own. The sale terms, including the structure of the deal, can greatly impact both sides. Sellers should work with their legal and financial advisers to draft the final purchase agreement—whether that is an asset purchase agreement or a stock purchase agreement.

Contact me if you would like to conduct a free in-depth valuation to discover the asset, liquidation, equity and enterprise values of your business and see how your 12 financial ratios stack up against your competition’s. I would be glad to take your ownership through the process, provide the resulting 26-page report and show how to optimize your value.

A Few Other Key Points:

Never negotiate alone.
Avoid selling to one buyer. “If you have one buyer, you have no buyers.”
Build and execute on your growth strategy before you sell. Demonstrate it can be accomplished. Often your potential can be your most valuable asset, and proving it can be golden.

___________________________________________________________________________________________
Mark Faust
513-621-8000
mark@em1990.com
@markfaustsr

Next Gen Spotlight: Missouri Farmer Diversifies to 'Roll With the Punches and Grow'

Thu, 12 Sep 2024 15:30:03 GMT

After graduating from the University of Missouri in 2011, Lance Dobson returned to his family farming operation in Lexington, Mo. Today the farm consists of a corn and soybean rotation, but they are looking at ways to diversify. Cattle have been added into the mix following the decision to plant a cereal rye cover crop ahead of soybeans to use as forage. Dobson also started a seed dealership for Beck’s Hybrid to diversify his own income.

Q: Why did you feel a need to diversify?

A: I think it’s important. As human beings, it’s much easier to focus on just one thing. Life has a rhythm, and you know what to expect during every part of the year. However, diversification allows you to roll with the punches and grow. As we get out of our comfort zone, it usually leads to good results. Whether it’s exercising or farming, hopefully diversification in our day will yield results that improve our longevity. I think we’re seeing the need for it right now given the direction our commodity prices are going. So, maybe we need a few more cash avenues or options on the farm.

Q: Why did you become a seed dealer?

A: When I first returned to the farm, I didn’t have a lot of ownership in the operation. I was mostly just an employee helping with the daily operations. After a few years, I really wanted to take on something of my own. I wanted something I could take hold of and build. I had an opportunity sent my way to start a seed dealership, and so I took it. At that time, we were also going through a downturn in the farm economy, and so it was another way to diversify my cash flow. Since then, it’s helped me build a lot of relationships with neighbors and given me the opportunity to figure out how we can all help each other grow our operations.

Lance Dobson introduced cattle and planted cereal rye cover crop ahead of soybeans to use as forage.

(Dobson Farms)

Q: What lessons have you learned from diversifying the operation?

A: Try something new just enough to get a good experiment going so you can see how it could play out on a larger scale, but don’t get in over your head. You don’t want the test to be so big that it’s a real disaster. Right now, it’s hard to try new things when financials are already constrained, but find a way to try. It’s one of the best ways to find new successes. Yes, there will always be failures, but just go learn from them. I think once you make that jump, you’ll be happy you did in the long run. There’s so much personal growth that happens when we can try new things.

Q: What else do you hope to accomplish in the next five to 10 years?

A: A goal for our farming operation is to be more self reliant and resilient. Today, a lot of the constraints we have are based on commodity prices, which we don’t have any control over, and our input prices, which we also don’t have any control over. So, if we can build our farm to where we don’t rely as much on herbicides, or synthetic fertilizers, I think we’ll be in a better place. Similarly, I’d like to build our operation so we don’t rely as much on straight commodity prices. Maybe that means we do more direct-marketed goods, or we sell our corn as value added, somehow differentiating what we’re growing from commodity yellow corn, I think we’d create a lot more resilient and sustainable business.

Your Next Read — Next-Gen Spotlight: Arkansas Farmer Always Willing to Try Something New

Risk and Reward: How These Farms Found Success With Vertical Integration

Thu, 12 Sep 2024 15:29:47 GMT

Johnny Hunter II was just 10 years old when he lost his dad. At the time, Hunter’s family had 12,000 acres of rice and soybeans under cultivation near Dexter, Mo. And while his mom could have sold the family acreage, she chose to keep the farm for her two children, preserving an already existing family legacy of planning for future generations.

“My dad was an early adopter of precision - leveling and irrigation and no-till,” Hunter says. “That was an extremely smart business move.”

The third generation to run what’s now known as Castor River Habitat and Farm, Hunter points out his dad’s decision improved the value of the land as well as its production.

Eight years ago, Hunter made an equally important decision for the farm: vertically integrating.

“At one time I was farming 6,000 acres, and I was miserable,” he says.

Hunter says he saw two paths to stay in farming: Be a low-cost producer with tens of thousands of acres with economies of scale or learn how to create value by putting a product in the world so consumers can reward you for it.

Castor River Achieves Market Distinguishment
Hunter’s family made the decision to vertically integrate in 2017. The following year they constructed a rice mill, created a CPG brand and built out their own packaging line. Then, they launched a trucking company to cover first-mile distribution of their long-grain rice. They also partnered with warehouses in strategic areas of the country.

“From field to warehouse, it’s all Castor River,” Hunter says.

Now, rather than aspiring to farm tens of thousands of acres, Hunter’s family owns and operates a land company, farming company, trucking company and a parent corporation.

“Before [vertically integrating], we employed two full-time people,” he says. “Now we employ over a dozen, farming 2,500 acres of rice, soybeans and corn.”

Castor River’s target audience is anyone who wants sustainably grown, high-quality food, Hunter explains. Business channels include food service, partnering with restaurants, college campuses, institutions and catering companies. High-end grocery retail stores comprise the farm’s other channel. They also sell their long-grain rice products directly to consumers online.

“Having your own brand opens up the opportunity for new revenue channels,” Hunter says.

“Landowners and farmers are all highly concerned about what yearly revenues are going to be,” Hunter adds. “By vertically integrating and going direct, we have transformed ourselves from price-takers to price-makers.”

Reviving a State’s Tradition
Unlike the Hunters, South Carolina’s Coxe family did not begin their operation in rice production. When Campbell Coxe graduated college in 1981, he came home for the summer to help his grandfather farm the family’s 1,000 acres of mostly cotton.

“I was a geography major and was going to see the world,” Coxe says. “But I fell in love with this piece of property and never left.”

In 1986, Coxe took over the operation, but disillusionment set in quickly. Over the course of a decade, the farm averaged about $16,000 per year, and Coxe was borrowing close to $1 million just to plant cotton.

“At the time, the cost of cotton was incredibly high, and the return was so low I couldn’t get my hands around it,” he notes.

He searched for a crop he could take directly to customers — growing and processing on the farm.

Located in the Pee Dee River watershed, Coxe’s fifth-generation farm sits about two hours north of the Lowcountry. The state’s subtropical, humid climate makes growing conditions ideal for nearly any crop.

But Coxe was looking for gold — Carolina Gold rice, that is. Once the largest producer of rice throughout the Colonial period, South Carolina’s rice industry began its steep decline after the Civil War, owing to labor, pest and weather issues. By the early 1900s, rice all but disappeared.

“South Carolina’s rice culture was interesting, but rice wouldn’t come back commercially unless it’s profitable,” Coxe says.

In 1998, he decided to plant 10 acres of Carolina Gold, the original 1685 varietal grown in the area. Timing became key.

“The internet was picking up speed, and there was an interest in farm-to-dinner plate just as we were getting up and running,” he says.

As his business and his acreage expanded, Coxe constructed a rice mill on-site. “There hadn’t been a mill in South Carolina since the Civil War, but I didn’t want to keep sending my rice to Arkansas with diesel fuel prices at $5 a gallon.”

Striking Gold with Vertical Integration
Today, Carolina Plantation Rice includes 200 acres of rice, composed of four varieties. It produces cornmeal, grits, fish fry breading and rice flour. Unlike larger producers, Coxe doesn’t keep the highly aromatic rice stored for prolonged periods.

“When it’s fresh and new, it has a pungent taste and smell. We want the consumer to get as fresh from the farm as they can get.”

Direct-to-consumer online sales make up 40% of the farm’s orders, with the balance in wholesale orders from national supermarket chains, such as Whole Foods and Fresh Market, as well as large restaurant groups.

“We’re growing more and more every year because market shares increase,” Coxe says.

Though vertical integration has transformed his operation, Coxe notes that challenges still remain.

“Every bit of it is hard,” he says. “You’ve got to have a good market, and you have to have your marketing planned in your mind or on paper. Where are you going to take this stuff? What’s it going to cost? And who’s going to implement it?”

The 3 Biggest Updates to USDA's Farm Loan Programs You Need to Know

Thu, 08 Aug 2024 18:50:10 GMT

With commodity prices down and farm returns expected to significantly decline , USDA’s Farm Service Agency (FSA) has released three major changes to its farm loan programs in an effort to increase the opportunities farmers and ranchers have to be financially viable.

“The analysis of what has gone into these rule changes is nothing short of tremendous,” says Zach Ducheneaux, FSA administrator. “Our team has poured over hundreds of thousands of loans in our portfolio and really identified some things that FSA can, should, and with this rule, will be doing better to support our producers and their economic viability in the countryside.”

The three most notable policy changes, which will go into effect on Sept. 25, include:

1. A new, low-interest installment set-aside program for financially distressed borrowers
According to Ducheneaux, this program was modeled after the Disaster Set-Aside program, but the difference is a borrower doesn’t have to be affected by a declared natural disaster in order to qualify. However, it’s important to note producers must be in FSA’s portfolio by the time these updates go into effect in order to be eligible.

“Oftentimes, what the producer needs is just a little breathing room,” Ducheneaux says. “We have the ability to do that for producers that are in our portfolio as of Sept. 25.”

The program essentially allows eligible, financially distressed borrowers to defer up to one annual loan installment per qualified loan at a reduced rate.

“When we set that payment aside, instead of accruing interest at the already established rate, it’s going to accrue interest at 1/8 of a percent,” Ducheneaux explains. “We’re really setting aside a payment, and it’s not going to balloon on you in a way it jeopardizes your operation as you’re coming to the end of that term.”

2. Access to flexible repayment terms
Some of these more flexible terms include smaller interest-only payments and longer loan terms. The idea behind this change is to allow producers to increase their working capital and give them the ability to save for education and retirement.

“Having a retirement fund built into this can help ease that generational transfer and help enable us to recruit young farmers and ranchers back to the farm,” Ducheneaux says. “Because FSA can make adjustments to our terms, it might help them step out of that job they’ve got in the town 40 miles away for health insurance and pay for that for their family on their own terms.”

He adds that the concern this could add more interest to the loan over time is valid, the point is to increase available cash flow for the operation.

3. Reduced additional loan security requirements
This update reduces the collateral requirements for direct loans from requiring available security equal to 150% of the loan amount down to 125%. One of FSA’s main goals with this change is to reduce the frequency borrowers need to use their personal residence as additional collateral for a farm loan.

“If you think back to 40 years ago, some of the most heart-wrenching stories you hear are when you’re losing the family home,” Ducheneaux says. “With this rule, if we do not need it to get to a one-to-one security position, we will not take the primary residence as additional security.”

In addition, FSA will release liens on collateral the borrower initially provided as additional security after establishing a history of on-time payments.

Additional improvements include streamlining and automating the Farm Loan Program process with a loan assistance tool, online loan application, online repayment feature and a simplified direct loan paper application.

“We think these changes to the terms are really transformative,” Ducheneaux says. “Any of these three provisions on their own would be a great transformation, but taken as a collective, this really signals a new day in ag finance, where FSA is going to position itself as the leader and the example for how our friends in the lending community might consider doing this.”

Ducheneaux explains a robust training process on the changes is underway for FSA employees and asks for patience and grace as the team comes to understand the new tools they have.

Georgia Farmer Reaps Bigger Yields By Focusing On Better Acres

Tue, 11 Jun 2024 18:01:46 GMT

The week of June 10, Farm Journal is celebrating the next generation of American agriculture. Our goal is to encourage you to plan for the future and cultivate multigenerational success through the transfer of skills and knowledge. Think tomorrow, act today to align your asset, resource and financial legacy.

Bigger ain’t always better. When does a farmer drop almost 3,000 acres and not look back? Ask Alex Harrell.

In 2023, Harrell got skinny-fat — as in less ground but booming yields. Cold turkey, he slashed his row-crop operation in half and went in hot pursuit of high management and yield per acre, searching for the sweet spot with rent, equipment, labor, time and insurance.

Sign or Walk
After the 2022 season farming in a partnership alongside his father, Rodney, in Lee County, Ga., Harrell faced a fork in the road when a landlord approached with a higher lease on a 2,800-acre farm that typically produced middling yields. Harrell was under no illusions about the rent rate: Someone would grab the acres; someone would pay the ask. However, it wouldn’t be him. Rent on irrigated ground in his area runs $260 to 330 per acre.

Adios to 2,800 acres, leaving him with 3,000 acres of predominantly red loam to grow corn, soybeans, watermelons and wheat. He immediately sold some equipment, but the basic structure of his operation stayed the same.

“Certainly, variable costs went down with fertilizer, seed and fuel, but my fixed costs — equipment, labor and insurance — when divided by acreage, suddenly almost doubled,” he explains.

Overall, fewer acres mandated higher profit and yield per acre.

“For us, 6,000 acres was too much, and I was determined to find the ideal amount of ground,” Harrell explains. “There’s a fine line between too much and too little. You’ve got to have enough land to stretch your payments and costs, but if you overextend, you ruin the balance the other way, and yields go down. Yield instantly became even more crucial when we cut acres.”

Without coincidence, Harrell was about to grow the highest yielding soybeans in agriculture history.

Bull’s-Eye of Efficiency
On Aug. 23, 2023, Harrell watched 206.79 bu. per acre flash across his yield monitor in the Georgia Soybean Production Contest.

Although the 206 bu. contest soybeans were on a tiny fraction of acreage, they were indicative of Harrell’s overall high-management approach.

“In the next two to three years, we want to average 300 bu. on irrigated corn, 100 bu. on full-season soybeans, 80 bu. on double-crop beans, and 100 bu. on wheat,” he says.

In 2024, Harrell’s operation climbed to 4,500 acres — the bull’s-eye of efficiency, he says, with assistance from his father, Rodney, two local hands and five workers from South Africa.

“For us, we’ve got so much spraying, watering and land prep that 4,500 acres is just right to keep our intense yield focus,” he explains.

This year, Harrell has 250 acres of watermelons, with the remaining ground in two-thirds corn, a third in wheat and double-crop soybeans and 300 acres of full-season soybeans.

“Another goal is I’d like to get to a point where I’m 90% corn,” he says.

Tech to the Rescue
At 4,500 acres, Harrell’s management has a major new boost: drones.

“I got rid of our ground sprayer and bought an older one to do nitrogen applications in corn when the crop is taller, but last year I used all drones and had no ground rig,” he says.

With two drones, Harrell covers 400 acres per day.

“We’ve almost eliminated our airplane bill. I’m the Southeast drone dealer for AgriSpray, and we mix and spray everything ourselves,” he says.

Timeliness is supreme when it comes to high-yield corn and soybeans, Harrell emphasizes. Mother Nature never reveals her calendar.

“Take away timeliness and it doesn’t matter how you spray or what fertilizer, products or snake oils you use because they will not work right,” he adds.

What advice does Harrell offer when considering an acreage shift?

“Go gradual to the sweet spot to avoid the problems I had with fixed costs per acre going up. Again, you might not have the choice to go slow. If that happens, focus on the acres you keep and stay extremely timely because when it’s time to go, it’s time to go.”

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Meet 87-Year-Old Joan Kerns, A True Trailblazer Who Helped Carve Out A Niche For Her Family Nearly 60 Years Ago

Mon, 26 Feb 2024 22:06:28 GMT

Cut by cut. Slice by slice. Every detail counts for Edgewood Locker , a northeast Iowa-based business that’s been spliced together for nearly 60 years in 1966.

With no master plan, it started when Tom, a farmer, and Joan, a nurse at the time, were forced to find a new place to live.

“We were on his dad’s farm for five years when his dad announced he was going to sell the farm. He wanted us to buy it, but we could not afford to buy a huge farm back then,” Joan explains.

So, they found a farm to rent three miles outside of Edgewood, until an accidental fire on that farm sparked another change.

“Talk about an act of fate. We knew the lady who owned that farm was going to make us move, because she believed those stories that we started the fire,” Joan remembers. “Tom came home one day and said, ‘The locker in town is for sale.’ So, we bought it.”

It was that decision that changed the course for the Kerns family. Neither Joan nor Tom knew anything about running a meat locker, but they had the tenacity to make it work.

“Tom wanted to do the actual meat cutting and that sort of thing, and I was going to do all the books and the book work,” says Joan.

The business started out with minimal equipment: only a saw and a grinder at the locker. That didn’t stop the Kerns from seeing phenomenal growth.

“And every year we were in business, we grew. Every year we got bigger. And so, finally, we outgrew our plant,” she says.

The growth wasn’t always easy, and it didn’t come without financial hardships. Joan says the couple borrowed money to expand and grow six different times.

“But I remember, maybe the second or third time Tom said, ‘I’m going to go up to the bank tomorrow and borrow some money for the next addition,’ and I went up to do our daily banking that day. And the girl said, ‘Oh, we can give you the money.’ So, I borrowed the money, got back home and I told him. I said, ‘Well, I got the money borrowed for our new addition.’ Tom said, ‘They let a woman do that?’ That’s the way it was back then,” says Joan.

A Force of Nature

Joan’s son Terry will be the first to tell you how much his mom was a driving force behind the scenes, if she didn’t always get the credit she deserved.

“She’s kind of a force of nature, there’s no doubt about it, and probably even more so than anybody realizes,” says Terry, who’s one of two second-generation owners of Edgewood Locker.

What makes Joan’s role so essential to their growth is the fact Joan’s husband, Tom, was dyslexic. So behind the scenes, Joan handled the paperwork and books, all while raising four kids at home.

Bringing in the Second Generation Straight Out of High School

Joan is still a true trailblazer today, as the Kerns’ unconventional ways and business decisions also helped fuel the family operation.

“The boys had come into the locker business as they graduated from high school, which really let us dream bigger,” says Joan.

That was in the early 1980s. Tom and Joan didn’t just see their sons Terry and Jim as employees, they allowed the boys to buy into the business fresh out of high school.

“It wasn’t popular with their peers that they allowed Jim and me to buy in at such a young age, you know. They gave us a huge opportunity,” remembers Terry.

“And I think that’s why we grew as we did, because they were partners. They were going to be in this, and it made a big difference,” Joan says.

The growth has been impressive over the past 60 years, including building a new facility in the late 1990s that has seen even more expansion since.

“We built this business because she paid attention to detail. And she wanted to make sure it was done right. She still keeps us on our toes,” says Terry.

At 87-years-old, Joan is sharp, and attention to detail may still be one of her greatest strengths.

“She is not afraid to tell us when she thinks we’ve done something wrong,” says Terry.

Bringing in the Third Generation

While Joan doesn’t overlook the small things, she’s also the first to celebrate how much the family business has grown. It now includes four grandkids who have become part-owners.

“Oh my gosh, I did not see that coming. And they each bring their own experience, knowledge, their forte to the business,” says Joan.

“All of us in the third generation, all I feel have a very unique skill set, which allows all of us to bring something different to the table,” says Baili Maurer, one of Joan’s grandchildren who bought in as a third-generation owner.

“None of us really overlap much. We all have our own thing that we do, and it just works,” adds Katie, who’s also one of four grandchildren who are partners.

Katie and Bailli, along with Luke Kerns and Payson Kerns, are the third-generation owners of Edgewood Locker.

“They’ve got experience, they’ve got education in meat science in business. So, as fun as it was to grow with Mom and Dad adding Jim and me, this next generation really has the potential to do amazing things,” says Terry.

Third-Generation Growth

“We’re just doing what we can to take the business to a new level,” says Baili.

“We really expanded into wholesale stores and retail stores carrying our products. And we just keep going with what the second generation and first generation have been doing, as well,” adds Katie.

The growth is evident everywhere you turn. Construction in their retail and lobby area is a clear sign of even more progress.

“We had a major expansion of 19,000-square-feet that we’ve been in now a little over a year and a half, and I think it’s running well,” says Terry. “We remodeled our old processing facility and updated that, and it looks like brand new.”

The decision to expand and remodel their retail and lobby area was propelled by the busiest season for Edgewood Locker: deer season.

“I think last year, we did 3,700 whole-carcass deer, and then over 3,500 batches of boned-out deer that came in, so well over 7,000 different batches to jerky,” Terry says.

With that type of volume, Edgewood Locker has also been able to invest in bigger and better equipment.

“I’d like to say we had this great master plan, but we never had a real plan to say, ‘Well, next year, we’re going to get into wholesaling, or next year, we’re going to do this.’ We just kind of took it as it came. Something presented itself, we ran with it, and ran hard with a lot of it,” says Terry.

A Legacy Worth Sharing

With 130 full-time, part-time and seasonal employees, Edgewood Locker also offers other custom processing, and has products for sale, in more than 100 retail stores across Iowa. And it’s that side of the business the third generation has already helped expand.

“I hope we can just continue the legacy,” says Baili.

“I’m hopeful that we can just keep doing like we’re doing, keep growing where we can and keep expanding things and have it all set up for the fourth generation if they would like to join in someday,” Katie says.

Walls of awards are a product of what Joan and Tom started in 1966, but that isn’t what Joan is most proud of today. The greatest gift just may be the fourth generation and the chance to carry on a business that started on hopes and dreams.

Reduce Competition: New Tool Partners Investors and Farmers

Wed, 27 Sep 2023 21:36:18 GMT

If asked the question “What’s a piece of ground you would love to own?” most growers could probably picture it. Maybe it’s a neighboring farm or rented land that’s been in the family for decades.

But if that land came up for sale tomorrow, would the capital to purchase it be readily available?

Farmers have plenty of equity in their land, but it’s not easily accessible and could lead to them losing out on that sale. This is a problem the team at Fractal – a U.S.-based farmland financing platform – has set out to solve.

“I’ve had so many farmers that say, ‘We need to double in size, or we need to increase by X number of acres’,” says Ben Gordon, Fractal co-founder. “But when you do the math to see the capital it will take to do that, there isn’t a clear plan.”

To help create that growth plan, Fractal pairs farmers wanting to expand their operations with hands-off investors who recognize the value of farmland.

Farmers Stay in the Driver’s Seat
Fractal purchases minority ownership – up to 45% - in a piece of high-quality cropland selected by the farmer. These acres must be owned and operated by the farmer.

As for the investors, they leave the decision-making up to the one who knows the land best.

“Farmland is a great investment, and farmers are best positioned to manage that investment,” says Gordon.

“We raise capital from outside investors in a big pool and then we find the farms. Investors don’t own a single access to a single farm – they own a portion of a pool.”

With the money from the investment, the farmer can purchase new assets needed for the operation such as land, storage, etc.

The Details
The investment is for a 10-year term. After the first two years, the farmer can buy out Fractal’s ownership at any time. They can also renew the investment once it ends.

In exchange for the investment, the farmer pays an annual premium. This fee can be discounted by implementing regenerative practices on the land such as cover crops and no-till.

Gordon shares that while Fractal may not be a fit for everyone, he hopes it will provide an option to families hoping to keep their farm operating for years to come.

“I’m hoping that we are one small part of a bunch of great legacies and great operations being able to continue,” Gordon says.

A New Option for Farmland Legacy Planning

Tue, 05 Sep 2023 21:25:00 GMT

Earlier this year, Legacy Farmland Trust was launched as a new tool for farmers who may not have the next generation to farm but want to keep the land in trust for their family and multiple generations.

“It was born through witnessing the family dynamics and what farmland ownership can do to families,” Eric Mueller of Legacy Farmland Trust says. “When it came time to sell, not all members were on the same page.”

The creators of the trust saw that in these scenarios, where multiple family members have a stake in an asset, there is limited ability to liquidate or transfer it without everyone agreeing.

To solve the issue, they created a fund where instead of collecting dollars to invest, they take contributions of farmland.

“The farmer is able to contribute an asset to the fund and convert it into fund units that give them a ton of flexibility around transferring and gifting to the next generation,” Jared Hollinger of Legacy Farmland Trust says. “They’re selling a piece of an asset without selling the farm.”

Paul Neiffer, a farm CPA and host of The Top Producer Podcast, interviewed three members of the Legacy Farmland Trust team to learn more about how their approach works for some farmers.

Family members who want to sell their share of the land now have fund units they can sell immediately or over time. Those who didn’t want to sell have interest in their land, as well as the other assets in the trust – allowing them to diversify their holdings.

“Instead of that farm owner owning just that one asset, they now have shares in our fund which gives them exposure to all the assets in the underlying fund,” Hollinger says. “That gives them diversity and it gives them opportunity because a farm may be performing poorly one year or excellent another year. And by having exposure to the entire fund, it goes ahead and insulates them from any kind of bad activity that may occur.”

It’s important to note that contributing into the fund does not create a capital gains event.

Farmland Legacy Trust can also accommodate future generations who would like to come back to the farm.

“If a grandchild is up and coming or if an unnamed heir is contemplated as somebody who may want to own that land 10 or 20 years from now, they can be designated as the first right to purchase and have the ability to pull the asset back out of the fund in the future,” Hollinger says.

They can also designate a right to hunt on the land or a right to gather on the land if the family is no longer actively farming but would still like access to it.

As far as the type of land best suited for the trust, Hollinger says the ideal asset to come into the fund is one with little to no debt and a fair market value of $2 million or greater. The land should also be primarily farmland – not timber or land with permanent crops such as apples or grapes.

If a landowner would like more information about contributing to the trust, they can fill out an interest form on the company’s website .

After that, the owner will provide details around the asset and Legacy Farmland Trust will come back with a proposal. A third-party appraiser then does a series of due diligence to determine the asset’s value and the process moves onto closing. Hollinger estimates the process takes about 90-100 days to go through.

To learn more about Legacy Farmland Trust, listen to their episode on the Top Producer podcast .

Stepped-Up Basis Leaning in Favor of Rural America on House Ways and Means Panel

Thu, 02 Feb 2023 23:21:15 GMT

Tax policy geared toward farmers and others that transfer land and other assets to heirs will get a renewed focus at the Ways and Means Committee this year, a marker of the panel’s more rural tilt while still promoting measures that favor business.

Chairman Jason Smith (R-Mo.) has cast himself as a champion for working families, small businesses, and farmers, “not the people on K Street.”

With the retirement of former Rep. Kevin Brady (R-Texas), whose district included Houston suburbs, and the exit of former Rep. Tom Rice (R-S.C.), whose district included Myrtle Beach, and the addition of members like Reps. Randy Feenstra (R-Iowa) and Claudia Tenney (R-N.Y.), the panel now has greater rural representation.

Stepped-Up Basis Breakdown

The step-up in basis tax rule reduces the capital gains tax on inherited property. The Joint Committee on Taxation has noted that the failure to collect these taxes costs $40 billion per year, citing a 2021 Congressional Research Service report.

Read more: Use Portability to Avoid a Potential Multi-Million Dollar Estate Mistake

In Democratic proposals to eliminate the provision, lawmakers have included exemptions of up to $1 million and for farmers.

Rep. Bill Pascrell (D-N.J.), who has introduced legislation on the issue, told Bloomberg Tax that “people are getting away with murder” on the issue. There’s room for compromise, though, Pascrell said.

“We’ve made some considerations for farmers, small farmers, but there’s no question in my mind that inheritance has never been taxed many times,” Pascrell said. “Anybody who believes that your inheritance should not be taxed, I’ll listen to, but that, to me, is probably in the top five of what needs to be reformed.”

Favor in the House

With Republicans now in control of the House, Feenstra said he wants to introduce legislation shielding the stepped-up basis and like-kind exchanges.

Read more: Top 10 Stories of 2022: Tax Court Rules Farmer Can Use Old Tractors

The upcoming farm bill will be the first opportunity to add in those types of policies, as well as extending or renewing tax measures from the 2017 tax law that expired at the end of 2022, Feenstra said.

“There’s great opportunity for that Ways and Means can work with the Agriculture Committee,” Feenstra said, “and make sure whether it be in conservation, an energy title, or even a research and development title.”

Tenney said she hopes to make other tax measures benefiting farmers permanent, pointing to the 2017 tax law’s 20% pass-through deduction for certain businesses, which she said benefits farms in her district.

Feenstra also wants to see full bonus depreciation, which allowed companies to immediately expense capital expenditures, and which starts to phase out this year, make a return.

A research and development tax deduction that expired last year could also be included in the farm bill, Feenstra said.

Senators Urge Grantor Trusts Reforms

Wed, 03 May 2023 14:15:59 GMT

Several Senators (Warren, Whitehouse, Sanders and Van Hollen) sent a letter to the IRS this week urging the IRS to make various changes to grantor trust rules. These Senators have sent similar letters in the past and nothing has really been implemented. However, the IRS is under a Democratic administration and perhaps this may get some traction.

In the letter, they mention that the number of estates that have paid any estate tax have dropped in recent years. The high was 7.65 percent in 1976 (when the federal exemption was a “whopping” $60,000. The latest figures show that only .08 percent of estates owed estate tax in 2019 with an exemption close to $12 million.

The proposed changes are as follows:

Make any transfer between a grantor and a grantor trust a taxable event by revoking Rev. Rul 85-13,
Make the payment of tax for the benefit of a grantor trust a taxable gift by revoking Rev. Rul. 2004-64,
Make Intentionally Defective Grantor Trust assets not get a step-up in basis,
Set a minimum percentage of GRAT assets be considered a gift (part of the Biden Green Book proposals), and finally
Reduce the ability to discount transfers of family limited partnerships.

As we mentioned, these proposals have been made by these same Senators multiple times. We shall see if any of them get implemented.