Succession planning can be hard on farmers’ mental health. Not only does it require contemplating what life will be like beyond the days of a key family member, there can also be significant differences of opinion as to the best way forward for the passing on of assets. This can lead to anxiety, stress and the temptation to place succession planning in the “too hard basket” or put it off until later.
But the more you delay, the more difficult the succession planning process will become. Instead, there are plenty of ways you can make the process run smoothly – front-footing it and having conversations early is key.
It’s never too late to start this process but the earlier you start the easier it becomes.
In addition, there is no one recipe for succession planning but there are plenty of lessons to share. Your plan will be unique to your situation.
Regular, open communication
Succession planning is often the elephant in the room in family farming businesses, and if you don’t address it early, anxiety can build. It’s better to avoid making assumptions and front foot the conversation so you can understand different family members’ expectations from the beginning. People’s preferences and desires will evolve over time, so it’s a good idea to have these conversations on a regular basis, so everyone can stay abreast of developments. Strong communication in an appropriate way on this topic can further galvanise family relationships.
Be clear on your objectives
When considering if you want to transition the business to someone, you need to answer the following questions
- What are we wanting to achieve in this process?
- If you want the farming business to continue, who will be best placed to carry this out?
- Is that person keen to take over, and do they have the right knowledge and skills to ensure the farm will remain viable long into the future?
- What are your capital needs likely to be? What lifestyle are you wanting?
- Do you have any other family members that you wish to assist and if so to what extent?
- Does the current position of the business enable us to achieve this? If not, what changes can we make?
Strong communication with all parties can help you answer all of these questions and achieve a desirable outcome. It also often helps to have facilitation from an independent party who deals with these conversations regularly and knows what questions to ask - they also will provide a good pressure release valve for yourselves.
Including your professional team in these discussions as it provides for strong accountability and outcomes as you’ll all be aligned.
Setting up a successful farming business for the future
You've worked hard over the years to build up your farming business, and you will also likely have large sums of capital associated with it. Not only may you want to leave a sustainable, viable farm to your chosen heir/s, you also want to enjoy the fruits of all your efforts and be able to live your desired lifestyle. So succession planning will also include reviewing your farm’s bankability, tax and business structure settings. This process may include right-sizing any debt so that the business is left in a viable position, allowing your children or your other chosen persons with the best opportunity to succeed.
You don’t have to do it alone
Emotions can run high in succession planning conversations, which is why it helps to have an experienced independent adviser to guide you through the process.
Rod Hansen, Agribusiness Advisory Partner at BDO, has helped many farmers navigate these tricky conversations: “At BDO, we know open communication is essential. Our regional spread means we live and work in the communities in which we operate, and have genuine ties to the land around us. We make a point of going to the farm and building strong relationships with families so that we can understand everyone’s desires and expectations, and ultimately achieve the best outcome for you and your farm.”
“A recent example of this has been our work with a Mid Canterbury dairy farming family that have worked together successfully for a number of years,” continues Rod. “There had been a desire for the business to transition to the family member working at home whilst giving strong regard for their other children. We have successfully managed to achieve this and provide the parents with some strong independence and ability to enjoy the next phase of their lives and the fruits of their earlier hard toil. In addition, the farming business is set up to succeed into the future and importantly the relationship of all family members has been maintained, continuing to respect each other.”
“You do not have to undertake the succession planning process alone,” says Rod. “If you need help or simply want to know where to start, please don’t hesitate to reach out.”
At BDO, we understand that your business' performance can have a significant impact on wellbeing. The BDO Wellbeing in Agribusiness report deep dives into some of the biggest mental health challenges facing farmers - and offers practical advice to help alleviate some of the stresses that come with running an agribusiness, including cash flow management and succession planning. View the insights here.