5 min read
Succession planning is the process of transferring farm assets, knowledge, and skills to the next generation. This page provides you with guidance on how to approach succession planning, emphasizing its importance not only for retiring farmers but also in case of unexpected events like illness or death. You'll learn about the key considerations in planning, such as starting early, developing a comprehensive plan, financial due diligence, clarifying expectations, seeking support, and maintaining open communication. The page also offers tools and resources to help you in this process, ensuring a smooth transition and a legacy for future generations.
You've built up significant assets, knowledge and skills, but how and when do you pass these on? This is not just an issue for retiring farmers, as illness or death can strike at any time. Is your business ready to transition?
Succession planning is the process by which farm assets, knowledge and skills transfer to the next generation.
Do you want to be the driver of your business future or the passenger along for the ride? Start your succession plan now by beginning the conversations and setting your business up for a planned future that will leave a legacy for future generations.
It's an inclusive plan that outlines the process for the transfer of both the financial and knowledge of the business, is deemed fair to everyone, is well communicated, agreed upon, understood and is monitored and reviewed.
There are many ways to approach the subject and there is no off-the-shelf guide to follow. A succession plan must meet the needs of all involved parties and be economic for both the retiring and farming generations.
The starting point is having conversations. Conversations about the future, what the business ambitions are, your expectations and your business partners, and addressing any ‘icebergs’ or below the surface tensions which could impact on the business transfer process now or down the track.
Integrate succession planning thinking and conversations into your business sooner rather than later. Succession discussions should happen on a regular basis within the business and if required with a succession specialist.
Succession planning can be a difficult topic because of emotional connections to both the farm and/or the succeeding farmers. This can cause fear and procrastination.
Consider starting sooner rather than later and developing a big picture plan. Undertake due diligence, gain clarity on expectations, get support, determine what is equitable, and communicate often.
Succession planning takes time, it's a process and not an immediate resolution.
Develop a business plan and strategic plan and put these into action ensuring farm management practices achieve this plan. Revisit the plans often and consider progress made and changes needing to occur to ensure you are still on track to achieving the business vision. Do you have clarity on the values and goals of all parties involved and how do you bring these together to achieve a win-win?
Including the skills and attributes required of the successor.
Research and ask questions, read, attend seminars, discuss with farming friends their experience and lessons learnt.
This could be an independent facilitator to assist in mediating succession planning meetings or the use of client-focused accountant, farm advisor, lawyer and/or bank manager. Your professional team could be formed into an advisory group to add advice to your succession planning process.
Often facilitators will follow a process whereby they interview/question the parents, siblings and siblings' partners separately to uncover their values, needs, wants, expectations and business vision individually before they bring this together and start to form a mutually beneficial plan.
Write down succession plans and goals including both the personal and business goals of all involved. Ask the where, why, what, when and how questions.
Even modest assets should have a will. If you do not have a current will, your assets may not pass to who you intended or could end up with the state. Update your will on marriage, separation, having children or changing business structure.
Throughout the year revisit the plan, build on where you have gotten to and to involve all parties. This is not a do once and never revisit activity.
Communicate in a way which allows everyone to be heard. Effective communication, having the opportunity to contribute and listening must be at the heart of any plan. Unless there is strong understanding of everyone’s thoughts, needs and vision, the plan and decisions will be made on assumptions – assumptions lead to misunderstanding and misunderstandings lead to conflict.
Setting up structured meetings at set times through the year that follow a set agenda and have contributions from all those involved, including the farm advisory team could be useful.
Take time to identify the skills and behaviours needed to ensure a successful future and select a person/people who matches these needs; or develop a training plan so they can acquire the skills.
Take a few minutes to complete the succession planning self-assesments and determine your next steps.
Stepping back from the day to day running of the farm is an exciting stage in life, but one that can be complex. What are the big things to consider? What are the common pitfalls and how can you avoid them? And for farmers looking to step back next season, what are the three key things you can do now to be in the best position? Find out in this episode with James Allen, agribusiness consultant and managing director of AgFirst Waikato.