Succession doesn’t just happen, so don’t put it off – this was clear advice for farming families at Farmers Weekly‘s recent farm succession planning conference.
Ensuring the smooth transition of a farm business from one generation to the next is challenging but incredibly important and should be tackled on an ongoing basis, says Matt Lobley, professor in rural resource management at Exeter University.
Speaking to growers and livestock producers at the event on Wednesday 31 October, Prof Lobley said farming families should plan the future of their business sooner rather than later to ensure its ongoing success.
Time to act
“Farming families need to plan for succession, plan for retirement and keep communicating with each other. And if you are the parents, you need to involve your children and other family members in the discussions.”
Six in 10 family farms lack a written succession plan, suggests Farmers Weekly research. Despite the risk this poses to the future of family farming businesses, more than half do not have a succession plan at all.
“It is important to have the conversation,” said Prof Lobley. “Yes, it can be difficult – but you can seek help and advice where needed. It will cost you money, for sure, but it is an investment in the future of your farm and an investment in the future of your family.”
Do your homework
That said, it was worth doing some homework first, added Prof Lobley. Farm advisers – including accountants and other business consultants – should only be approached after the family has agreed an outline of what it would like for the future, he suggested.
“If you go in with a blank sheet and the clock starts ticking and they are charging themselves out at £1,000 a day, it is an expensive way to fill in a piece of paper. Come up with a plan – or hire a facilitator who can help you come up with a plan.”
Likening succession planning to an Olympic relay race, Prof Lobley said it was vital that the farm business baton was handed over without being dropped.
One chance to get it right
However, unlike top athletes – who always had another race to run – farming families have only one chance to get it right.
“You must prepare your successors – you have to give them managerial responsibility. You have to let them have those reins.”
Prof Lobley said it was also important that farming families were sensitive when discussing issues such as retirement. It might be better to talk about bringing the next generation into the business rather than talking about the older generation taking a back seat.
Top 10 tips for successful succession planning
- Start planning early. Succession planning takes time and the sooner you begin the better. Doing so helps manage people’s expectations for the future.
- Be adaptable. View succession planning as an ongoing process, rather than something with a beginning and an end. Adapt your plans as circumstances change
- Generational hand-down. You don’t have to hand the business to those next in line – skipping a generation can sometimes reinvigorate a business.
- Value assets properly – including emotional assets. Make sure all family members feel valued, especially those who have “put their whole life” into the farm.
- Is ownership important? Remember that responsibility for running a business is different to ownership. You can hand one on without the other.
- Equal isn’t necessarily fair. Handing on a business in equal parts might not be fair where one person has contributed to its success and another hasn’t. See point (4) above.
- Retirement. Consider the consequences of retiring – physically, mentally and financially. Take pension advice, consider care home fees and make provision for them.
- Use your farm advisers – get your accountant, management adviser and solicitor together so they are all going in the same direction.
- Involve everyone. Get siblings talking, including those who don’t work on the farm. They might want to return home. Involve spouses too.
- Use a facilitator. Find an independent person to chair family meetings. Make them business-focused and formal, with an agenda and a target outcome. Take minutes.
Thanks to Carter Jonas and Duncan & Toplis for their sponsorship of the Farmers Weekly Succession Planning event. Farmers Weekly had full editorial control of this report.