For many multigenerational farms, understanding what the operation is worth is becoming more urgent. Ownership transitions, rising land values, and higher equipment and input costs are pushing valuation to the forefront. Family farms often represent decades of hard work, careful decision-making, and long-term investment, making an accurate valuation an important part of planning for what comes next.

Why do farm valuations matter?

Many multigenerational farms are entering a period of transition. As older generations look toward retirement and younger generations prepare to take on leadership roles, having a clear understanding of the farm’s value becomes essential. A current, well-prepared valuation can help farm owners:

• Support ownership transition and succession planning
• Establish fair value for buy-sell agreements
• Prepare for financing or restructuring
• Improve long-term estate and tax planning
• Reduce uncertainty among family members and stakeholders
  
  

A Farm Is More Than Just Land

It is common to hear farm values discussed in terms of dollars per acre. While land value is a significant component, it rarely tells the full story of an agricultural operation. A complete farm valuation often includes:

• Agricultural land and buildings
• Machinery and equipment
• Grain inventory and stored commodities
• Livestock and breeding stock
• Working capital and operating assets

In many cases, it is also important to separate the value of the operating business from owned real estate. For example, land may be held in one entity while the operating farm exists in another. This is why a structured valuation looks beyond per-acre value to evaluate the full operation.

What drives farm value?

Several factors influence the value of a farming operation, and these drivers can vary widely depending on the type of agriculture involved. Some of the most common value drivers include:

• Land quality and productivity, including soil types and yield history
• Condition and age of machinery and facilities
• Operational efficiency and cost management
• Historical financial performance

Strong documentation and consistent financial reporting often play a significant role in supporting value. Operations with clear records and well-managed processes are typically easier to evaluate and may inspire greater confidence among lenders, buyers, or successors.

How does a farm valuation work?

A formal farm valuation typically combines multiple approaches to determine a fair and supportable value. Depending on the operation, this may include:

• Income-based approach
  Evaluates earning potential based on historical performance and projected cash flow
• Asset-based approach
  Values land, equipment, livestock, and other tangible assets, minus liabilities
• Market-based approach
  Compares similar farm sales or transactions when data is available

In many cases, valuation involves a combination of these methods to reflect both the asset-heavy nature of agriculture and the performance of the operating business.

Why are family farms more complex?

Multigenerational farms often involve layers of complexity beyond a typical business valuation. For example, some family members may work full-time, while others may have limited involvement but still retain ownership interests. This can create differences in expectations regarding compensation, ownership value, or future decision-making.

Ownership structures can also add complexity. Land may be divided across multiple entities, trusts, or inherited ownership groups. Structure can affect the way that value is transferred between generations.

In addition, emotional attachment to farmland can influence expectations. For many families, farmland represents more than an investment. It reflects history, identity, and long-term stewardship. While those connections are meaningful, they can sometimes complicate discussions about value.

A structured valuation process provides an objective foundation that supports clearer communication among family members.

How can I prepare for a farm valuation?

Preparation plays a significant role in the quality and accuracy of a farm valuation. Farm owners can prepare by gathering:

• Recent financial statements and tax returns
• Equipment lists with purchase dates and estimated values
• Land ownership records and lease agreements
• Inventory and livestock records
• Production and yield history
• Debt schedules and financing agreements
• Organizational charts or ownership structures

Beyond documentation, maintaining consistent recordkeeping and reviewing financial performance regularly can strengthen long-term valuation outcomes.

Plan Ahead with Lutz

Valuing a multigenerational farm is not a one-time event. It is an important step in a broader planning process that supports continuity and long-term success. Whether preparing for succession, evaluating ownership changes, or strengthening financial strategy, our accounting and M&A services for the agriculture industry can help you understand your farm’s value. Contact us to learn more.

For additional information on this topic, view our webinar recording on strategies for a smooth farm transition.

• Achiever, Learner, Individualization, Arranger, Relator

Tyler Hohenstein

Tax Manager

Tyler Hohenstein, Tax Manager, began his career in 2014. He has developed extensive expertise in tax and client relations while also assisting with staff training and development through his leadership on the Grand Island office’s internship program.

 

Specializing in tax consulting and compliance, Tyler focuses on industries such as agribusiness, construction, real estate, and vehicle dealerships. He takes pride in seeing his clients succeed and grow, providing comprehensive solutions that address their unique challenges. His thoughtful approach to problem-solving helps him create practical strategies for complex tax matters.

 

Tyler lives in Palmer, Nebraska, with his wife Kara and their cat Louie. Outside the office, he can be found playing golf, working cattle, and smoking meat. Tyler also occasionally assists his veterinarian wife as a vet assistant.

308.385.1134

thohenstein@lutz.us

• Analytical, Achiever, Context, Competition, Learner

Ryan McGregor

Consulting Director

Ryan McGregor, Consulting Director at Lutz M&A, began his career in 2012. With a diverse background in banking and finance, he has developed extensive expertise in business valuation, mergers and acquisitions, and exit planning. 

Specializing in succession planning and valuations, Ryan focuses on helping clients across various industries including agribusiness, construction, healthcare, and manufacturing. He conducts in-depth market analysis and prepares comprehensive valuation reports for purposes ranging from gift and estate planning to Small Business Administration (SBA) qualified opinions. Ryan values building relationships with clients and finds satisfaction in seeing them successfully transition their businesses through well-crafted succession plans. 

 

At Lutz, Ryan has demonstrated his commitment to professional expertise, earning multiple designations including Certified Exit Planning Advisor (CEPA), Certified Valuation Analyst (CVA), and Certified Mergers & Acquisition Advisor (CM&AA). His analytical approach and drive for continuous learning enable him to provide innovative solutions tailored to each client's unique needs. 

 

Ryan lives in Omaha, NE, with his wife Beth and their three children. He enjoys spending time with his large family and is an avid golfer and sports fan. 

402.778.7946

rmcgregor@lutz.us

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