Over the last couple of years, food and agribusiness owners have dealt with more than their share of volatility. Between the pressures of the pandemic, a persistent labor shortage, skyrocketing commodity prices, supply chain gaps, and geopolitical unrest, there hasn’t been a moment of “normal”.
Global strains are showing no signs of abating, and while inflation is down, it’s persistent. High interest rates have pushed up the costs for investments in technology and equipment that will be needed to address labor shortages and increasing regulatory requirements. For all you may have endured to build your business, sustaining it in the coming years won’t be easy.
The changing face of food and agribusiness
Food and agribusinesses are no strangers to change, but the forces driving transformation are stacking up. Today’s consumers want more healthy food choices, and their concern for the environment is leading to demands for greater transparency and sustainability in food production and packaging. Consumers want to connect with products on a personal level, forcing brands to step up their digital presence and offer an active and responsive social media presence.
The pace of new technology and innovative techniques is expected to accelerate as the industry is called to produce more food with less environmental impact.
Artificial intelligence, data analytics, advanced robotics, precision agriculture using regenerative techniques, and other technologies making their way through food and agribusiness will demand leaders who are curious, open to rethinking the way the business operates, and willing to take risks and commit to transformation.
Ongoing geopolitical conflicts and trade policy skirmishes will likely fuel instability. The winners will be those with the vigilance to watch for opportunities and prepare for the challenges. As deglobalization unfolds, it will shake up cost structures, demand levels, and competitive make-up.
Business pressures will extend to capital deployment as agribusiness owners are called to find funds to respond to evolving conditions by:
- Investing in equipment and technology to counter higher costs and limited availability of labor
- Rethinking real estate strategy as land becomes more valuable and interest rates rise
- Evaluating growth investments to keep up with demand or serve new markets
- Considering consolidation as increasing regulatory and compliance requirements advantage larger players with greater resources
- Looking at private equity—which continues its active interest in food and agribusiness—as a partner or buyer
For all the strategic thinking, hard work, great people, strong relationships, smart business decisions, and good fortune it took to get your business to where it is now, you can expect to be challenged by even greater business demands over the coming years.
Demands of being the CEO of the family
An examination of the dynamics of a multi-generational family business reveals why food and agribusiness leaders sometimes feel that their role as head of the family is as stressful as their job as CEO of the business. Some elements of family businesses in food and agriculture that weigh on leaders include:
Generational divergence – While business founders may have held the family together in the early days, with each generation, the distance from the founder’s vision grows and the strength of the ties between the family branches weakens. Over time, simple sibling rivalries can turn into more complex family branch turf wars with many players wanting to have a say about what a company should do, how it should be done, who should lead it, and how it provides payouts to its many owners.
Business succession can have as much of an impact on family harmony as it does on business operations. Many families include individuals who have some, but not all, of the skills needed to run the business. They can sit side by side with family members who possess few of the necessary skills—but believe they have them all. The work of putting the most promising family members in the right roles, finding a place for the less talented, and satisfying the family factions backing each demands political savvy.
Isolation from management standards – With no private equity investors to satisfy, family dynamics sometimes supersede business norms and best practices in dictating the way family businesses operate. Whether you’re being thwarted in making merit-based personnel decisions, blocked from smart growth investments, or second-guessing on capital moves, suboptimal decisions to satisfy low-business-acumen stakeholders or to appease family factions can add to the pressures of running the business.
Finding yourself at a crossroads
Given all that’s going on in today’s industry environment combined with the ever-present burden of leading a multi-generational private business, many owners find themselves at a crossroads. They’re asking, “What is the best path forward for my business that will support everyone—my family, my employees, my management team, and me?”
The questions owners should ask themselves:
- Is now the time to begin transitioning out of the business?
- What is best for my family and their financial future?
- Are there family members who are up to the task of running the business in this climate?
- What’s best for the company when I exit?
Taking the time to reassess your life goals and consider the best path forward can frame your business role and guide decisions that will benefit you, along with your family, management team, and employees.
1. Create a clear vision for yourself. First, clarify your own interest in leading the company. How does running the business over the next few years align with your vision for your life and the goals you’ve set for yourself? Consider the best timing of your exit as well as your plans for life after transition. What do you want your personal legacy to be? Where do you want to devote your time and energy over the long term?
If leading the business energizes you, you may prefer to remain in your current role and prepare for the food and agribusiness challenges ahead. You might also consider alternative methods of involvement, perhaps as strategic advisor, chairperson, consultant, or ex-owner ready to share your experience and insight as needed.
2. Realistically assess the next generation of family leadership. How prepared is the next generation of the family to successfully lead your business forward? Are they passionate about your business and the industry?
Bear in mind that your family successors can take a key role in running the business without assuming strategic leadership positions. They may be happiest serving in an accounting, marketing, or technology job, with management or a professional board best equipped to fill the leadership void.
3. Put your business in the best position for a transition. Whether you’re ready to make the move today or your exit is years down the road, start preparing the business now for a future change in leadership. Food and agribusiness leaders are often deeply embedded in running their businesses and have an almost irreplaceable body of knowledge about the operations. Whether your transition involves installing a family successor or selling the business, upgrading staff skills, automating key processes, and adhering to the most up-to-date management practices will make it easier for your successors to pick up where you left off and run the company successfully.
The personnel, systems, and capital actions you take to prepare for a smooth transition are the same ones that will maximize your company’s value. As you get the company “transition-ready,” you’ll strengthen the business and boost its value, whether that’s realized through a stronger offer from an investor or buyer or with a higher valuation when you sell your ownership stake within the family.