Farming the Countryside with Andrew McCreaFTC Episode 248: Just How Bad Can a Farm Transition Go? Lessons for All of Us
This may be one of the worst farm transition stories you’ll ever hear. Ron Rabou is willing to talk about it so that others can avoid the pain he encountered. He shares how the process moved from a disaster, to him owning his own successful farm today.
This edition of Farming. The countryside is brought to you by pivot bio proven 40 os the nitrogen you need. Now on seed, learn more at pivot bio dot com.
Welcome to farm in the countryside. I'm Andrew mccray. This may be one of the worst farm transition stories you'll ever hear. Ron Rabo is willing to talk about it so that others can avoid the pain he encountered, he shares how the process moved from a disaster to him owning his own successful farm. Today, it's our topic for this week's farm in the countryside brought to you by pivot bio.
One of the biggest and most important expenses I have as a corn producer is nitrogen. That's why I was interested in pivot bio and have been a customer now for four years. Pivot biop proven OS provides a more reliable method for delivering nitrogen to corn. One pro box. A pivot biop proven 40 Os has the equivalent on seed nitrogen to replace as much as 1200 gallons of anhydrous. 1700 gallons of un 28% or five tons of urea
proven 40 on seed isn't lost to denitrification or volatile pivot bio recently completed the broadest us single season implant nitrogen study ever conducted to date side by side comparisons show pivot bio plants have 14% more implant nitrogen and 12% more biomass compared to untreated plants. Demonstrating the nitrogen efficiency of pivot bioproducts to learn more. Just talk to your local sales rep or go to pivot bio dot com.
You may have heard Ron Rabo on this program in the past but every time I interview him, I learn something new, not only about his personal story, but also about how I can better operate my own business, both now and in the future as you'll hear his ranch's transition was pretty much a disaster. And while in his twenties, he had to begin figuring out what to do in order to survive in farming. I think you'll find the story captivating and also leave you thinking about what you'd try to do to prevent such a story in your own family.
Ron. We have visited before about a variety of topics, but for those that perhaps have forgotten or maybe not heard you before, give a little bit of your background. You grew up on a farm, got back into farming and for you, this is part of what you talk about. You got back into farming fairly suddenly, full time, right?
That's correct. So I'm uh 1/5 generation rancher actually in the state of Wyoming. So we're in the southeastern part of the state and I grew up on horseback, I grew up with cows and when I was 26 years old, ended up working cows with my dad. And, uh, he collapsed. I ended up having to give him CPR. He was 58 years old
and it really changed my life and it really set me down a course that I never planned on. He was, he was in business with his two cousins and his father and the ranch was a equal partnership.
But the challenge that we had is that the ranch hadn't grown in so many years that we had a piece of the, you know, that we had the whole pie, but there wasn't enough pieces of the pie to really share. So really the operation was big enough for one family, but we had four families that were living there. And so when I ended up taking my dad's place, not only did I find myself in the middle of a lot of family descension because of the split in the family tree
uh through cousins and distant cousins. Uh But I found myself really involved in a business that really wasn't cash flowing. I found myself having to take a long hard look at that and say, what is the future plan with this? So when you're involved with partners who really don't have much of a vision, uh because they're more, their mindset is more about traditionalism
than it is about progress that provided a huge challenge and it was something that ultimately could not be worked out. And so,
like you said, I found myself venturing away from the family ranch, you know, and committing the, committing the big sin or breaking up the family ranch, found myself on my grandparents place uh with a portion of an operation. As you might imagine, when you take a portion of something that's not operating very well uh at full capacity and you take a portion of that, that doesn't work either. So we had to really take a long hard look at what we were doing.
Ended up after four years of really a lot of financial struggle having to sell almost everything that we had. And then we started over and so we started building a farm. Uh We really mapped out very specifically and said, look, I'm 1/5 generation Wyoming Knight. I'm fifth generation on this uh on, on this ranch, but we don't have the ranch anymore. So what does that mean for us? And what it means is that we had to take a long hard look and say this is an heirloom
and that's the way it had always been treated. We wanted to take a long, hard look and say this has to be a business, it has to run, it has to cash flow, it has to work and there has to be a vision that had there. We have to have a business plan to make this thing work. So we got into the organic industry. Uh We began to buy farmland. Uh We began to buy equipment, we began to put up storage, we began to uh build infrastructure, we began to rebuild the infrastructure
and we began to reach out to community members and other landowners uh and tried to develop some leases. And honestly, at the time, I really didn't know what I was doing. I just knew that what I was doing wasn't working. And so something else had to be done. And so, in essence, over the last 15 years, we've been able to create
um a fairly sizable operation uh where we raise uh organic crops uh on a large scale. And it's really proven to be a business model that's worked really well for our family. It's allowed us time together. It's allowed us a business structure that cash flows and pays for the investments that we've made. It's allowed us to expand, it's allowed us to create opportunity for our Children.
And I think ultimately, that's really what it was about for us. It wasn't about how can we
focus on keeping the ranch in the family or in our case, keeping the farm in the family for the sake of keeping the farm in the family. It was really about how can we run a business that takes care of our family and hopefully can carry our family into future generations. But most importantly, honestly, can give us time and freedom to choose to be who we want to be.
So, my Children know now and I think this is one of the biggest benefits that we've seen from this. My Children know now that they're not obligated to what I felt like I was always obligated to which was Rainbow Ranch. And my Children are not obligated to Rainbow Farms, but
we encourage them to pursue the things that they're passionate about. And if that's agriculture, if it's ranching, if it's farming, if it's drumming, if it's fishing, if it's whatever it is, then we want you to pursue that and we're gonna do everything in our power to create opportunity for you. So it's been a total gift for us.
One of the things that you talk a lot about with farmers and young farmers, older farmers, everybody is communication. So I'm interested because your family had not had those discussions and it, in the end it turned out all right for you. But I'm suspecting you will say, yeah, but it would have been better if we'd have done this a different way. So what is it that people need to be doing now? So they perhaps don't wind up in a situation where you were, were forced to make some decisions. You probably don't want to get there. So what do I do to, to avoid that?
Don't fool yourself.
So my family always had conversations but they weren't having the right conversations, I'll use this for instance. So the ranch partners had a buy sell agreement. Ok? So it was set up to allow the next generation to come in and buy through a life insurance policy. But part of the stipulation of that buy sell agreement was a sons only clause.
So remember I'm five generations deep clear back in the late 18 hundreds in wild west Wyoming and only the men were capable according to my family of running an operation. So there was myself, my other male cousin
and five girl cousins. One of, well, one of them was my sister. So four girl cousins. Plus my sister didn't matter if the girls were more capable than the men of running the operation.
They weren't sons. So they were never given an opportunity. And the thing that struck me odd was that one of the partners, one of my dad's partners didn't have a son at all. He only had a daughter. So while they had discussions about buy sell agreements and while they had discussions about estate plans, while they all had trusts, while they all sat down and had business meetings,
the conversation was never had about you don't have a son. How does this work for you? So not only didn't, none of the partners bring that up, the guy who only had one daughter, never brought it up either. So a lot of times we're fooling ourselves by thinking that we have a plan in place without thoroughly thinking through about what that plan might actually mean for the next generation.
And for me what it meant because my dad, my dad passed away out of order and I was actually in line to inherit my grandfather's share over time that because my dad passed away before my grandfather, I was not my grandfather's son. Therefore I could not inherit his share. So two words completely changed the course of our family business forever. Our family business who
had been around for 100 years got changed forever because of two words because we weren't willing to sit down and say, look, this doesn't make sense because I think a lot of times what we don't want to do is we don't want to have hard conversations.
But if we don't have hard conversations when we're alive with the people that it's going to affect those hard conversations are gonna get transferred to the next generation. They're just gonna become harder. So we had to address all of these things when my dad passed away.
So ultimately, when I made the choice to leave the family ranch, I left a lot behind because I couldn't inherit my grandfather's share. So we came to a compromise, which it's in my book about how we came to that compromise and what it meant and what the figures looked like and all of that. But ultimately, when you have a business like we did, that was split on one family tree, two separate branches, 50% on each branch um to make 100% of the operation
ended up because of one provision because my dad passed away, who was the healthiest one, quite honestly, of all of the partners, he passed away first. It created an imbalance in the actual ownership structure of our farm. So the other side of the family ended up was significantly more than what our family had.
And our family quite frankly was the one that really did the business and was the one that really kept things running. My dad was really the hub of the operation and that's not to diminish the other partners contributions. It's just the way that it was, I mean, there's typically in a group and in a business and we have the person that's the leader and that just happened to be my dad in that case. And so, so I think that sometimes we think if we don't have conversations, well, it'll just go away or it will take care of itself.
Well, it will take care of itself, but it doesn't give us the results that we want. So not having conversations is still having conversations. It doesn't just doesn't produce the results that we want. I'm
interested you talking about those conversations. Was this something the family was aware of and should have been having the conversations or was it something that we really hadn't thought about? And it would been good to have an outside person come in and evaluate
or maybe it was a little bit of both. Yeah.
So, so the the partners of course, were aware of the son's only provision. I'm not so sure that the spouses were aware of the son's only provision
I can tell you and I explain this in my book as well that my father's sister was 100% not aware of the provision. So when my grandfather passed away,
she was under the assumption um I get the ranch
and uh that created so much angst in that relationship that surprisingly enough, she went through all the because because of all the angst that this created for her and she ostracized me to be the bad guy. Although this had been this way since I was in elementary school, I had nothing to do with drawing this up. I had nothing to do with how the the all the partners sorted this out.
My aunt became so angry about it when she found out about it that uh she went through all the photo albums that she got out of my grandparents home and cut my head out of all the pictures, put my head in an envelope and mailed it to me. This is long after, you know, a few months after my grandparents passed away.
But when we don't have these conversations, it creates a lot of heartache. So her problem became with me. Although the problem that was created, had nothing to do with me.
It had everything to do with the previous generations and the conversations that didn't take place, this was a serious disruption in her life because apparently she had been planning that this is the way it was going to work for her. But because she and her father never had a discussion about how this is supposed to be structured and what it looks like for her, she was treated very, very fairly. But, but because she had a different perception of how it was supposed to be,
that her idea of fairness was not the same as what my grandpas was. And so we have to have these conversations about fair isn't always equal, equal, isn't always fair. But my grandpa was extremely fair with how he treated her. And uh she uh did very well um as a result of, you know, his passing and my grandmother's passing. But because it did not meet her at level of expectations,
it created disharmony in the family. It destroyed a relationship that's never been healed and it put me right in the middle of that. And so we have to be willing to really look at these things for what they are and, and to ask hard questions to have to have hard conversations, we have to be willing to sit down with family members that we might not see eye to eye with at all.
In fact, we have to sit down with family members that we might not even like at all. But if we don't have those conversations while we're alive, it's only gonna get worse. So,
what do you suggest then for families, all of us that would have farms or land and so forth? We have this situation, hard conversations. Ok. We can have those. But is there a step by step process of how I should begin to work through this or should I bring in some outside people to help me with this? I'm sure it, it varies.
Well, I, I think the traditional approach is I'll go to my attorney, I'll have my attorney draw up some documents. And so what the attorney does is the attorney says, ok, I have a boiler plate and they're gonna cut and paste and here's your document. And I think that's exactly what happened in our case.
And so we suggest I suggest based on my own experience and through the work that I've done through the dirt project and through um family farm transition planning with the other ranch families I talk about in my book that we should really bring. This is bigger than what an attorney can figure out. This is bigger than what an accountant can figure out what you, what you, what we must do because the world of production, agriculture is changing.
Um the dynamics and families are constantly changing and as we bring new generations in, as, as new generations are born and die. Um those dynamics change. And so what we need to do is we need to focus on bringing a team of people together. And so an attorney is part of that. Uh an accountant certainly is part of that. A financial planner is part of that.
Um a life coach can be part of that. Um an AG consultant, can be part of that.
Uh So there's a, a team of people that we have to use uh to bring together so that, that they can cooperatively work with the family as a third party. And sometimes we need that ad consultant or that farm consultant or that mediator to come in and maybe facilitate these hard conversations that maybe they're not a conversation that I wanna bring up with some of my family members. I think a lot of us are in that, in, in that position.
But if we bring a third party in a non threatening party to help, ask some of those questions, to help disseminate some of that information, bring it back to the family and say, OK, this is what I'm hearing. Are we all on the same page? But this is just a bigger subject than what we know as traditional family farm and estate planning. It's bigger than what an attorney can handle. We have to assemble this team
and have that team work cooperatively with the family so that we make sure that what we put together is the best fit possible for the circumstances that we find ourselves in.
I'm curious if you could go back in time, what would you have advised the generations before you that they should have done or would there have been anything to, in a sense? Avoid some of the heartache that you had to deal with?
Yeah. You know, I, I really, so, first of all, uh, it's a great question. First of all, I don't think that, that my family or my dad's partners. I don't think any of them ever sought to create problems. I think that they thought they had done the best job that they can, they, they could with the information that they had at the time. But as I look at things retrospectively, there are a lot of things, um, one of those would been, have more open communication with your spouse.
You know, because of the, the lineage that I came from, you know, we're talking wild west here, right? And, uh, the spouses really had nothing to do with the operation. And, and so what the partners decided to do is what the partners decided to do. And then everyone else was on a need to know basis. I would suggest that they bring in the younger generation and
help them to learn how to make decisions, help them to learn how the operation is run. It doesn't mean you have to open your books out and show all the numbers specifically. But if we're not teaching the younger generation how to make hard decisions and see some of the inside of how our businesses work, how can they know how to do it if something happens like it did in my case, I mean, I was thrust into a position, even at 26 years old,
I had never planted an acre of anything in my life. I had no idea how our banking structure uh was formed. I had no idea how any of the, the, the bookkeeping end worked. I had no idea how the different pieces fit together. I had to figure it out.
And so I was able to do that, but how many of us can be thrust into a position like that and figure it out and still make good decisions. One of the things that I would really encourage that generation to do is figure out, ok, so you guys talk about retirement and you guys talk about wanting to pass it on to the generation. But what does that specifically mean?
Like we can talk about pie in the sky and we can talk about dreams and ambitions. But unless we put something on paper and unless we really take a long hard look at the numbers to see if the numbers actually work when you have in our case, when you have partners that are equal partners and everyone's making $600 a month, whether they need it or not. And they still have to pay for their own expenses
and they've never been able to save up any money for retirement. What kind of a transition plan is that? So, there was, there was a lot of talk about someday I wanna retire. But what does that specifically mean? What does it mean for a guy like me that says, look
as being part of the next generation. I can't
raise my family on $600 a month. You know, it's, it's not gonna, we're in the 21st century, it's not gonna happen. But they thought, you know, hey, that, that's what worked for us. And so the business plan was, we just don't spend any money. Well, that's no business plan. So it's, it's all about risk management and it's all about proper financial planning and things aren't always what they seem to be. So when we look at a situation from the outside
and we look at it from
a business from the outside looking in, it looks different than what it looks like from the inside out.
So my aunt for an example and I think probably a lot of my cousins thought, well, we're rich, we have a ranch
so everyone will be able to just come back here someday and it's all fine and we can all own a piece of it.
But that wasn't the case. The case was, is that the, the pie was so small that by the time you divvied it up, the numbers just didn't work. And so, so that's what I would tell them I would say. Um And it's, you know, it's easy for me to live retrospectively, right? But, but, but what we can do is we can learn from those mistakes and we cannot repeat those mistakes moving forward. Assemble a team,
have hard conversations, be realistic about those conversations, make sure that everyone is informed.
Uh And that can prevent a lot of heartache in the future. Before
we wind up, you're out there speaking, you mentioned your, your book. So tell folks how they can interact or find out more and learn from what you have experienced and hopefully do this the best they can.
Yeah, absolutely. So, so uh my, my uh second book actually is called uh Make Your Own Way. And it's really about our family's journey through breaking the mold and breaking family tradition
and finding ourselves in a really awkward position and, and, and really what it took for us to break the mindset of that tradition and to, to really build a business that worked for, for our family and works will work into future generations. And it,
I talk in there about, you know, 33 of the pillars that, that I think that all businesses need to have uh communication, trust relationships and why those are valuable, why they're important. And so um
it talks about bringing the next generation on board and why these conversations are hard and how we can have those and the different folks that, that we can involve to help pull that team together. And so, uh if folks are interested in, in uh in that read, uh they can find it on Amazon if they search my name. Uh My last name is R A B O U.
Uh They can find it on my website, which is rabo farms dot com. And then of course, we're, we're, we're on the, the social media uh uh world, so linkedin uh under my personal name and Facebook and Instagram under my personal name as well.
So that can all be found. And I welcome emails, phone calls, text messages, uh love to interact with families that are having this. I mean, this is a real, real issue that's going to plague American agriculture unless we can address this white elephant that's in the room because we're all going through it, whether we want to admit it or not, it's all part of, of our world in agriculture. We have to address this. And so I welcome any conversation with that, Ron, I
always appreciate the time to
visit.
It's super fun to always talk together, but I love it when we get to do it in person. So this is a
privilege. Thanks for listening to this week's show. Remember you can follow Farm in the countryside and our daily show American Countryside on Facebook, Twitter Instagram and youtube just type in farm in the countryside or American countryside and you can hear these shows in a variety of ways as well at farm in the countryside dot com. How many local radio stations or your favorite podcast platform? If you miss one of our shows, just use those platforms to go back and catch other topics of interest as well.
I appreciate you joining me. I'm Andrew mccray. I'll catch you next time on farming in the countryside.
This edition, a farm in the countryside has been brought to you by pivot Biopro and 40 os the nitrogen you need. Now on seed, learn more at pivot bio dot com.
