Family Business: Why They Aren't Down On The Farm

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Recently, I had a chance encounter with a person involved with the Virginia Cooperative Extension. Some facts I learned shocked me but point up both the opportunity and what’s wrong with most family businesses today - not just Virginia farmers - and why the next generation wants no part of them.

The Census of Agriculture is conducted by the National Agriculture Statistics Service of the USDA every 5 years and is where I got these figures. As Joe Friday would say on Dragnet, “just the facts ma’am:”

*63% of VA farms are not profitable. There are a total of 47,000 farms in VA in 2007-farm operators reporting a net loss: 29,616.

*95% of all farms in VA gross less than $250,000 in sales which is the volume necessary to support a “farming family of four above the poverty line.”

*86% of farms gross less than $40,000, the level of sales commonly described as “small farms.”

* Most farms are very small and getting smaller. About three-quarters of the farms in VA in 2007 are less than the average size (171 acres…down from 181 in 2002)

From another USDA publication we find, “Operators of new farms were more likely to be engaged in occupations other than farming and to derive income from non-farm sources.”

From the comments of attendees after my presentations in the last several years and from news stories, it appears a lot of business owners are in the same boat as Virginia farmers. Many are small and getting smaller, unable to make a profit and unable to support a family so owners take on other jobs to support their family business.

Of course kids don’t want to pick up a family business making $40,000 a year! Would you? They are looking for prosperity, for profits, for the good life – not a job pulling in less than a Starbucks manager.

The classic way of building wealth has been to find a need ahead of time and then fill it - that is innovation. Think Bill Gates and Steve Jobs creating the personal computer industry. Look at Jeff Bezos at Amazon seeing the future of Internet retailing or eBay’s Pierre Omidyar’s prescient view of customers trading online. But the race to build a better mousetrap has stagnated with the recession.

Entrepreneurs around the world are trying to decide what's the next “big thing” because nothing on the horizon is that innovative.

In a world where everything from insurance to banking, from real estate to Wall Street seems to have been built as a house of cards, how will we build wealth? The days of expecting a 20% return on anything from our houses to stock may be way in the future.

Stop looking across the fence America! The opportunity is right here, right now, with your family business.

American family businesses must get back to basics and get smarter about becoming profitable. The endless promotions of low-price and discounting that has eroded the businessman’s reason to invest in America has got to be reversed.

That may mean you need to get outside help with technology, modern management practices of how to get a decent ROI on your investment of time or taking a financial class at your community college. But it is up to the older generation to fix their businesses if they want to attract the young.

It hurts when I hear people say they don’t take a salary from their family business. That means they have all of the problems but none of the financial rewards. The reason kids don’t want to be a part of most family businesses is because they see all of the work and none of the benefits. It’s like they’d always have the baby in dirty diapers, never the child going off to college.

The opportunity has dried up in many segments of the economy – the grass isn’t any greener in New York or Seattle than in your community.

You want your family business to provide something for your kids? Make sure they see the upside - profits, not the downside.

© Bob Phibbs 2009