One of the main topics that will arise at some point in many farming households is succession. Many a time the topic is avoided through worry of conflict, arguments, or just generally not knowing where to start the conversation, in other situations it is a very open topic with a clear answer. We recently joined a discussion which was held by the AHDB, where Andersons discussed the key considerations that need to be made when going through the process of succession planning.
The discussion started with the first thing that should be considered when going through succession planning and that is timing. The timing of raising this sometimes-tricky conversation can be difficult, as there will never seem like an appropriate time. Andersons supported our theory that the earlier the topic is introduced and talked about, the better. For some in the family they will not have thought about their next steps, there may be more than one person who wants to be involved in the business or it may be that nobody is interested in superseding the business, so bringing the topic up soon enough allows all these conversations to be had with no timeframe or rushed decisions.
Dealing with family members not wishing to be involved
One of the hardest parts about succession planning and raising the conversation is that reality has to be faced that often there will be members of the next generation that do not want to take on the farming business. At this point the question is raised of 'what do we do to make this equal between everyone?'. It needs to be remembered in this situation, it is not about being equal, it is about being fair.
Each family will be different in how they feel best to fairly treat everyone. In most circumstances families want to keep the farm and it's assets together. Farming is so volatile and often relies on all of it's income streams, especially when farming is facing some of the most unprecedented times with the phase out of BPS and the introduction of the new ELM schemes. For example, if a farm has properties, the rent from those properties will help support the agricultural business, so to remove that asset could make a very big difference to the cashflow.
There are many ways you can support the next generation and feel you are fairly providing for them, for instance one of the things which is becoming more popular are life policies which will be in place to support the parties that are not wanting to be involved in the farm. However, as mentioned each situation is very different and unique so the answer for one business is not the answer for another.
Management and the transition
If/when successors have decided they would like to be involved, slowly a transition will begin. At this point you need to allow your successors to become more involved in the management and running of the business. You need to remember to be open minded about what their vision is and what they are wanting to get from the farm and then allowing them to incorporate that into some of the decisions for the future. This may be things such as wanting to diversify to a farm shop and considering the things that you could start to do early on that would help with that future goal. Therefore, this may mean that they are then involved in some of the investment plans and decisions such as increasing acreage or cattle numbers for example.
It is important to allow your successors to be involved in the budgeting and planning meetings so that they can understand how the business is to progress and are involved in the conversations around the path the business needs to be going on to improve or get to that next step.
An important element to also consider is there may come a point when the successor changes their mind and decided that they do not want to be involved in the farming business anymore. If they change their mind and go down a different career path, it is then key that you have made considerations for that and have thought about what your other options for the farm are, such as renting the farm out.
pension and retirement considerations
When you are starting to consider stepping down from the running of the farm and handing that responsibility on to the next generation, one of the things that is not often considered is how much will it cost you to live. Once the assets are handed over with the business you no longer have the right to take money from the business, so it is important that you think about all of your outgoings and what you will require from the farm when you retire. This includes private drawings, food shopping, car finance, house bills, pet food, etc. to ensure that you are also prepared for the next step.