What does the next 10 years of your farming business look like? A topic not often discussed because there is usually a lot of history, emotion, hard work, debt and equity tied up in these assets. It is difficult to work out what the best option / alternative is, to ensure the family’s legacy lives on.
Why do you need a farm succession plan?
Succession Planning by basic definition is, identifying and developing new leaders who can replace older leaders when they leave, retire or pass on.
Executed effectively, farm succession planning can increase the family’s well-being, relationships, wealth and the future of the family’s asset.
Are you all on the same page?
Getting all shareholders and stakeholders of your farming business on the same page allows relationships to grow and develop, rather than receiving false hope and expectations of what one may think they are owed. This creates unintended turmoil and can be resolved by getting all parties involved and beginning the discussion.
Younger generations are returning to the home farm with their respective partners and even new additions to the family. This reiterates the importance of understanding what the major shareholders wishes are for the future of the business.
If the intention of the returning family member is to continue building the foundation for future generations then how can this be allocated to ensure that those family members not involved directly with the farm are still considered in the overall picture?
Is the family member who is on the farm receiving a ‘fair’ remuneration package for their efforts or is this in the return for ‘sweat equity’ (labour exchanged for an interest in the farming asset)?
If plans are to change, then acknowledging this with those involved will ensure all relevant information is kept transparent, so that everyone continues working towards a common goal.
Fair and Equal?
What does this mean to you? Early inheritance / in-house loans are becoming more popular in situations where family members wish to see their daughters and sons build a desired lifestyle while they are still around.
If you are someone who wishes to leave the farm for generations to come, have you assessed the viability of them being able to service the farms requirements and are you offering a similar opportunity to those that don’t wish to pursue a career in the agricultural industry?
It has also been very encouraging for the future of farming to hear some farmers helping non-family members into purchasing their farm, when other family members don’t wish to pursue a farming career.
Some owners have offered to be a second tier lender to help get finance over the line, and buy-out and lease to buy programmes are being recognised in the industry.
Executing a farm succession plan
Once a plan has been formulated it still comes down to the execution. What does the support network look like to keep parties accountable?
Strong relationships with your bank manager, accountant, lawyer and any other advisor will help keep you in good stead to achieving your end goals.
So what does all this mean? I've been involved with a few farms where keen and eager family members have left the farm for different horizons, resulting in weakened relationships and upset.
Don’t get me confused, I’m not saying that the next generation is entitled to ‘the farm’ but make sure the intent is very clear from the beginning.
You don’t want a fantastic relationship with your children and in-laws to deteriorate over poor communication – it does happen.
Where to for you from here? Have a chat with your significant others and just begin the conversation. The earlier everyone’s on the same page, the better.
Need help with farm succession planning?
Get in touch with Regan if you have any questions.
029 778 1989 | email@example.com