Why a dairy’s succession plan includes £1.5m of debt

Giving the next generation an opportunity, not “a free ride”, by borrowing £1.5m to invest in revamping an autumn block-calving herd, has underpinned succession planning for a Wiltshire family farm.

Finance has been calculated so that it can be paid off by the time Max and Vicki Sealy’s son, Ed, is 40 years old.

“I wanted to give him a challenge, not something handed on a plate – when he’s 40, he can decide what’s next,” says dairy farmer and business consultant Max.

As Ed puts it: “Debt focuses the mind.”

See also: How self-feed silage allowed autumn-block herd to expand

For Whitelands Farm, Kington Langley near Chippenham, two key drivers set the timescale for change: a tired-out unit that was labour intensive for staff, and a son aged 24 who was keen to come home.

As a consultant, Max has often heard dairy farmers say they wish they had started thinking about handing over the reins earlier.

His own parents, David and Barbara, were proactive in this respect and this influenced his thought processes.

“Succession is never easy, but setting out a clear plan is important,” he says.

Farm facts

Whitelands Farm, Kington Langley, Wiltshire

Max (left) and Ed Sealy © MAG/Shirley Macmillan

• 350 Holstein cross Norwegian Red cows
• 233 replacements
• New shed for 90 beef-cross calves this year
• Autumn block-calving starting mid-August
• Average yield 8,000 litres at 3.55% protein and 4.3% butterfat
• Farm 247ha (own 162ha)
• Grow 36ha maize, buy in 40ha maize
• Rotational grazing platform of 81ha
• Grazing from mid-February until calving

Old buildings

Max and Vicki grew the herd from 120 to 260 cows, calving in a split block (moving to an autumn block in 2021) and rotationally grazing.

Silage clamps and a slurry store were upgraded between 2012-2014. Yet the system got to a stage when it had, at most, seven years left in it, says Max.

The old milking parlour © MAG/Shirley Macmillan

“It was labour intensive for our two herdsmen and a general farm worker – I did the feeding and Vicki the calves.

“Our choices were to quit dairy farming and do something else with the land and buildings, look at redevelopment, or put up a new unit.”

Knowing that Ed was always keen on the farm (and their daughter, Olivia, was not) helped them decide.

“We knew it was serious at sixth form when he wanted to go to Harper [Adams University] – we would have sold the cows otherwise.

“Olivia’s passion is horses and business, and in phase two of our succession planning, we will invest to develop her business.”

During Ed’s gap year in New Zealand, Max and Vicki flew out to visit and began discussing plans for a new unit based on robotic milking and rotational grazing

“We visited three grazing robot herds, and had applied for grant funding but then thought it was just complicating a grazing system,” says Ed.

“I’ve always been keen on the farm and post-school, did a harvest and contracting, so I got tractor driving out of my system.

“I’d done building work for other people, then did a dairy placement on a 600-cow autumn block-calving herd.

“This set a good basis for coming home, and I learned a lot about managing staff and how to retain people.”

© MAG/Shirley Macmillan

Study tour

The trio visited more than 40 good dairy farms for inspiration.

This influenced shed design, creating a simple winter routine, keeping one calving block (and doing it well) and focusing on labour efficiency.

They settled on three-row cubicles to reduce the cow-place cost, feeding along the outside of the shed, and a 24/48 rapid-exit parlour with feeders.

One person can milk 150-200 cows an hour, says Ed, who now employs two people.

Once the family had confirmed their building work and management changes, they looked at funding and partnership structure.

A capital injection from selling 24ha (60 acres) for warehouse development bought 81ha (200 acres) next door, allowing Max’s parents to retire financially from the farm as well as paying out his sister.

“It created a big enough farm to reinvest in. So, we borrowed £1.5m on the dairy and £0.5m to redevelop old buildings as industrial units for let,” Max explains.

“We have always borrowed money to buy land, and had a mortgage on the farm, so were not worried about it.” Building started in June 2022.

The most important thing about the succession process for Max was clarity “so everyone knows the outcome and we have something measurable, but with flexibility in the plan”.

Also critical was for Ed to feel sufficiently motivated “as there is a lot of pressure on him to repay debt”.

Good communication

However, doing this with his own family, he says he learned the importance of good advice from solicitors and accountants, good communication (particularly listening to family), the right timing, and getting the basics in place.

“If Ed had not wanted to return home after graduating, it would have left a big gap if he’d come home at 28 when we had sold the cows and developed the buildings.

“It shows you have got to do things at the right time for everyone.”

Max stresses they are not perfect, and arguments and emotions are a normal part of the process because it involves family.

“We had arguments and upset and had to go through it and come out the other side,” he admits, revealing that their former bank manager acted as a mediator.

“We wrote wills and gained power of attorney for both generations.

“We have had clear discussions with everyone together and written everything down, so that it could be revisited at the start of the next meeting, and the detail of who owns what is written in the partnership.”

Ed is currently employed as a farm manager with a contract, salary and a farm cottage at half market rent.

The plan is for him to join the partnership within five years. He will then be given 25% of retained profit dating from when he joined the business, similar to a profit share.

Aside from his energy and practical skills, what Ed brings to the business is a focus on data, he says, and making technology integral to management.

Auto-identification, feed to yield and software that can sort cows out for insemination not only saves time and stress, but makes for a nicer job, future-proofing it for him and the staff.

Future plans

As Max and Vicki plan to take income from property lets, not the farm, and enjoy some long-haul travel, Ed is developing the herd and consolidating performance.

“My five-year plan is to aim for a yield of 8,500-9,000 litres with 50% of it from forage, and reduce the reliance on Mum and Dad in the business.

“And in 10 years, I want to be in the business partnership and in a position that if another farm came up, we could replicate this unit.”