You have had the initial discussion, chosen appropriate successors, tackled the tax and legal aspects and got it all down on paper. Congratulations. But putting those succession plans into practice can be a daunting task, so how can you be sure it runs smoothly?
One of the most common concerns that the older generation has is whether their successors have the ability to manage the farm and finances to a high standard.
Education clearly has an important role to play here, whether that is formal college training, on-farm experience, or higher-level coaching.
“Successors should have as wide an education as possible,” says Christopher Monk, farm business consultant at Strutt & Parker.
“It is as important to know how to manage people and understand finances as it is to have practical farm skills.
“If the successor doesn’t have that managerial competence they should have the opportunity to go and develop it.”
Building the business
Farmers should allow their successors to take responsibility for different areas of the business over a period of time, and look to hand over the reins when they are about 30, says Mr Monk.
“It’s all about new talent, and giving them the skills and confidence to build the business and take it forward.”
One-third of farmers say their business can only support one successor, according to a Farmers Weekly survey, conducted in partnership with NFU Mutual.
In those cases, it is important to allow the younger generation to build their own business, take on a farm tenancy, form a joint venture or work elsewhere, says Mr Monk.
“If the farm needs to grow to support the next generation, give them the help and opportunities to do that.
“There are so many options. Inevitably, different people have different talents, so work out a strategy for the business and get it on paper, then allow your successors to get on with it.”
Mr Monk believes it is useful to have a date in the diary when the older generation will hand over the reins, and to communicate that with all stakeholders in the business.
“It is critical that staff know what’s going to happen, and who’s in charge. If you have non-active stakeholders, such as a sibling who lives away from the farm but remains a part-owner, for example, it is important to keep them involved with what’s happening, too.”
A clean break
One of the most difficult times can be the date of retirement, with almost 30% of respondents to the Farmers Weekly survey saying they do not want to retire. But it is important to have a clean break, says Mr Monk.
“Retirement should be something to look forward to – a move to less stressful activities. And it’s vital to have a point where you hand over completely – having two people trying to manage one business is a recipe for disaster.”
It can often help to follow the date of retirement with a holiday away, and then refocus attention on a separate enterprise, whether that’s a hobby, a different part of the business, or a new venture altogether, he adds.
“Maybe the older generation becomes the one to take on a contract farming arrangement, where experience is sometimes more appealing than youthful energy. It’s important to have a new role so you can back off and let your successors make their own mistakes.”
However, that does not mean that you have to abandon the business altogether.
“Set up colleagues and advisers that the younger generation can go to – but let them choose who to use as it doesn’t work to force your adviser on them.
“And make sure everyone understands the financial state of the business. Hold regular meetings where everyone is open and frank about how it’s working and where the business is heading.”
Look at pensions
Sean McCann, chartered financial planner at NFU Mutual, says it is important to review pensions and investments as part of the succession planning process.
“As well as providing an income for the older generation, which may allow them to take less from the business, they also offer access to lump sums when needed.
“Pensions can also provide the opportunity to pass on wealth to the next generation, without being subject to inheritance tax,” he says.
The younger generation may also be able to use their pension funds to buy farmland and property from the older generation via a self invested pension (Sipp) as part of the family’s wider succession plan, he adds. “There are potential tax issues so getting the right advice is key.”
According to Professor Matt Lobley, co-director of the Centre for Rural Policy Research, there is much the UK can learn from abroad.
A commonly used model at the Global Family Business centre at IMD in Switzerland is the three-circle model – a venn diagram comprising family, ownership, and business.
“Working out where people sit in the diagram can be a useful way to structure discussions and clarify thinking,” he says.
“There may be cousins who work in the business but don’t own it, non-family shareholders and people with conflicting interests. Once you have clarified roles, fears and desires, you can then move forward.
“There is an inherent strength in family businesses but a common problem is to be stuck in family mode when the discussion really needs to use business vocabulary.”
In the US, Canada and Australia, universities and other organisations run practical succession workshops to help farmers, while in France there are grants to encourage young entrants and help the older generation to retire.
“You need to address both ends – help the older generation have a dignified exit, not just get new entrants in,” says Professor Lobley.
The housing issue
One of the big issues is access to housing – both physically and financially.
“Doing a house swap on the farm provides the older generation with that connection to the farm, but whether that’s a good thing or not depends on the family relationship. It’s a decision that has to be made in conjunction with some open and frank discussion.”
Sometimes succession is not about the day-to-day management of the business, but it is still just as important to get it right, says award-winning farm manager Al Brooks.
“As a farm manager on diverse mixed estates, succession planning is important for the continuity of the business,” he says.
It’s important for landowners to liaise with their manager to ensure everyone is working to the same goals. We also have to know who owns what, and whether to run the books together or separately,” he says.
As a trustee of the Addington Fund, Mr Brooks has seen the devastation that lack of succession planning can cause.
“A lot of our work is in the tenanted sector, where, historically, incomes have been under so much pressure that the older generation simply can’t afford to retire,” he says.
“The business can go stale, and the younger generation don’t get a chance – or you end up with three generations living off a farm that can barely support one.”
With the dairy industry in its current state, the Addington Fund, where it can, is helping to provide an exit strategy for those in extreme difficulty, says Mr Brooks.
“That means the business can survive, everyone gets their quality of life back, the younger generation get their chance and the older generation get to retire with their pride intact.”
For those farmers facing such difficulties, Mr Brooks says the first step is to talk to someone.
“Pick up the phone and don’t be frightened to talk about it,” he says.
“A problem shared really is a problem halved, and talking it through can help relieve the burden of responsibility.”
John and Rachel Geldard, Low Foulshaw Farm, Kendal, Cumbria
John and Rachel Geldard started farming in their own right in their mid-20s, and have grown the business from a 90ha tenanted holding to a 283ha mixed farm employing 20 people.
At the same time, they have developed Plumgarths, a farm shop and food hub supplying Asda and other major retailers, wholesalers and restaurants with local produce from farmers in north-west England.
A strong advocate of giving young people the opportunity to run their own businesses, Mr Geldard handed over the farming reins to his two sons – Richard and Charles – when they were also in their mid-20s.
“I’d had more than 25 years making my own decisions and you have to recognise that they want that same opportunity,” he says.
“The way the business has expanded is very much attributable to bringing them in and giving them roles and responsibilities.”
After bringing Richard and Charles into the family partnership in 2002, the family had weekly meetings around the kitchen table, with everyone challenged to write their own five-year business plan for the farm.
They now speak regularly on the phone and hold monthly meetings, but the younger generation are fully in control.
Richard runs the home poultry enterprise as well as packing eggs for other producers, while Charles manages 150 Stabiliser suckler cows alongside 1,000 Lleyn ewes and 120 Charollais ewes.
“I’m still involved with the farm – I like to go along to sheep sales and shows and take a very strong interest in the retailing of the eggs,” says Mr Geldard.
“One of the biggest challenges was finding how to work with your own sons rather than employees who will do what you ask them to do.
“Standing back and allowing them to go their own way was really difficult. But one of the benefits of having the farm diversification is having another project to get me out of the farmyard.”
As well as the farm shop and food hub, Mr Geldard has developed letting units at Plumgarths, all of which offers an ideal opportunity for his daughter Victoria.
“We are fortunate to have grown the business to the extent that we can be as fair as possible to all members of the family.”
Mr Geldard attributes a lot of his success to overcoming challenges early in his career.
“Making business decisions early in your career gives you confidence and knowledge to make bigger steps in the future. We went through some very difficult years where we really had to focus on costs of production, but that enabled us to invest once cashflow improved.
“When you’re young you’re hungry to be better than average,” he adds.
“You gather knowledge as you pass through life, but by the time you have a barrelful you’re too old to have the energy to do anything with it. That’s why it’s so important to work with young people – it really is a pleasure and privilege.”
The McVeigh family, Kenton Hall Estate, Stowmarket, Suffolk
The McVeigh family bought Kenton Hall Estate 30 years ago and have spent much of that time renovating and improving it.
Although it is predominantly arable, David McVeigh bought seven Longhorn cattle seven years ago, which he has since built up to a herd of 48.
Around the same time he got planning permission to host weddings, which proved extremely fortuitous, as his daughter Emily returned to the farm three years ago to develop her own wedding business.
“I researched other wedding venues and realised it would be good to provide accommodation for the bride and groom,” she says.
“We already had a yurt, which we renovated, and Dad built a shepherd’s hut – we’ve now got five bell tents as well so can accommodate up to 20 glamping guests.”
Emily also offers woodland blessings and hen weekends, and is about to launch corporate days as well. Last year she converted an old byre into a butchery and set up a cookery school and food hub with a commercial kitchen.
“We’ve got two tenant butchers who cut our own pork and beef, which is slaughtered just five miles away – we have complete traceability.”
Emily’s sister Lucy is in the process of taking over the farm from David, keeping her own Oxford Sandy and Black pigs and managing the cattle and combining.
“Most of the field operations are contracted out, but Lucy’s learning from Dad all the time and gradually taking more control,” says Emily.
The sisters decided to start selling the beef at farmers markets and it proved so popular that they launched a gourmet burger trailer and opened a farm shop selling home-grown vegetables, pork and beef two days a week.
“We want to start selling into London. But it’s not a case of ‘we fancy doing this’ – we talk everything through and have to present a feasibility study with lots of research before doing anything,” says Emily. “Once we decide it’s right we all get behind it and do it.”
Brother Tom is currently studying agriculture at Reading University, and may come back to the family business in due course.
“We’ve got very clearly defined roles – if I wanted to leave and take the glamping business elsewhere there would be a clearly defined space for someone to come in,” she adds.
“All having different skills is a massive plus. Lucy is really practical and good with the animals, and I’m better at design and marketing.
“We work really well together because we’re not all trying to do the same thing.”
Bringing young blood into the business has definitely helped it to grow and thrive, says Emily.
“We’re part of a young producers group, through which we share and pool knowledge. And having a good understanding of social media gives the wedding business the edge against other country house venues as I’m really interacting with the 21st century bride.”
David is not due to retire just yet, but it will be a natural process over the next 10 years, she says.
“We talk about succession all the time – we are completely open about it.
“Dad has helped us financially and we have got proper payback plans in place. He has given us amazing opportunities and let us make our own mistakes, and has got trusts and pensions in place for retirement.
“For us, it’s really exciting to be creating something together and turning a 186ha mixed farm into something that can support four income streams rather than just one.”
Succession planning is often a difficult issue for farmers.
It can be quite a daunting topic to raise with family members, whether it’s because of the emotional issues that come with retirement or how to pass on a farm fairly to siblings.
NFU Mutual believes it’s important to start having conversations now involving all members of the family who are involved with the farm and to seek expert advice on the financial implications of the options open to them.