July 30, 2002

LINCOLN, Neb. — At least 90 percent of rural Nebraskans think helping people to take over local businesses, farms and ranches as owners retire is important to their community's future, according to the seventh annual Nebraska Rural Poll.

"There's hardly any difference between transferring ownership of farms or ranches and businesses. Rural Nebraskans see them as equally important," said John Allen, the Institute of Agriculture and Natural Resources rural sociologist who heads the annual University of Nebraska poll. Ninety-two percent of respondents said assisting with business ownership transfers is important; 90 percent said transferring farm or ranch ownership is important to their town's future.

That's a high level of agreement for any survey, Allen said. It highlights the vital role that small businesses, farms and ranches play in rural Nebraska. Transferring ownership of businesses, farms and ranches from one generation to the next is key to community continuity and viability.

"If we can't figure out how to transfer existing businesses, farms and ranches within families or to other individuals, we are going to lose a major portion of our economic base in rural Nebraska," he said.

That's why this year's Nebraska Rural Poll of residents in the state's 87 rural counties asked about business ownership transfer. The scientific survey is mailed in March to randomly selected residents. Results are based on 2,841 responses.

Only 14 percent of the business owners responding to the survey said they expect their enterprise will stay in the family and 23 percent said it will be operated by someone else. Among farmers and ranchers, 41 percent said their operation will stay in the family and 30 percent said someone else will operate it.

Among businesses owners, 31 percent said their business will close when they retire and 28 percent don't know what will happen. Among farm and ranch owners, 27 percent said they don't know what will happen but, because someone will work the land, none said their operation would cease.

The percent of rural Nebraska business owners who expect to pass their business along to a family member is about half the national average of 30 percent for all family businesses that succeed to the second generation. The rural poll did not ask if this would be a second generation ownership transfer.

Nebraska's strong family farming and ranching tradition and the global market for agricultural goods account for the much higher percentage of farms and ranches that will stay in families, Allen said.

"When you think about most main street businesses, their market is very local. As we see population declines, their markets start to erode," he said. "With farms and ranches, their markets are more global so they're in a better position to stay viable."

The poll found strong regional differences regarding the fate of businesses, ranches and farms.

In north central Nebraska, 40 percent of business owners said they expect their business will close when they retire while only 18 percent of Panhandle business owners expect to close. Overall, the number of business owners who expect their business will continue – operated either by family or others – ranged from 50 percent in the Panhandle to 28 percent in northeast Nebraska.

"When you look at the average age out there, these numbers begin to give us a timeline," Allen said. "If something doesn't change, in about 10 years or so we could see many retail businesses in these areas close. That has all kinds of implications. Their tax base could really erode."

The number of owners who said their farm or ranch will stay in the family ranged from 51 percent in south central Nebraska to 24 percent in the Panhandle.

Nearly 30 percent of farm, ranch and business owners don't know what will happen to their operations when they retire. Becky Vogt, the poll's manager, said that the undecided group represents some potential if owners can be convinced their business has value and if strategies can be devised to assist ownership transition.

"I hope we can find some creative ways to help people buy into these small businesses, farms and ranches," she said.

This year's poll also asked rural residents about the effectiveness of potential business retention strategies. Mentoring programs for youth interested in becoming business owners and programs that provide matching money for starting a business led the list with 68 percent and 67 percent of respondents, respectively, saying they would be effective.

The focus on youth makes sense, Vogt said, because it could solve two problems: keeping young people in rural communities and keeping businesses open.

Other strategies and the percentage of respondents who said they would be effective were: enhancing technology use, 63 percent; tax credit for development, educating owners on transition plans, business training for youth, and revolving loan fund, all 61 percent; and venture capital pool, 55 percent.

"It looks from this data that there are two pieces to this," Allen said. "You have to have an educational component and you need some policy issues addressed if we are going to be successful in transferring more businesses, farms and ranches to the next generation."

Some entrepreneurship education programs and micro loan programs have made strides but potential demand outstrips current capacity to provide education or financing, Allen said.

"Given the positive impact that small businesses, farms and ranches have on the economy and quality of life in rural Nebraska, it makes sense to provide tools to aid ownership transfer," Allen said. In the long run, the state's economy would benefit if more businesses stay open in rural communities.

The Nebraska Rural Poll is the largest annual survey of rural Nebraskans' perceptions on quality of life and policy issues. It provides a rural perspective to policy and decision makers. This year's response rate was 44 percent. The margin of error is plus or minus 3 percent.

Complete poll results are available online at Nebraska Rural Poll.

The annual poll is conducted by IANR's Center for Applied Rural Innovation with funding from the Partnership for Rural Nebraska and IANR's Cooperative Extension Division and Agricultural Research Division.

07/30/02-VM

Becky Vogt
Center for Applied Rural Innovation
Nebraska Rural Poll Project Manager
(402) 329-4821

Vicki Miller
Research Communications Coordinator
(402) 472-3813

Department: Agricultural Economics