Succession Planning – it’s good to talk!
Family farming setups are commonplace, with one generation working closely with another to achieve a collective goal. More often than not, this may involve three generations grafting together and working long hours to drive the business forward.
Inevitably each day’s work will be considered and planned around the breakfast table, with commodity prices, the weather and perhaps the latest family news forming part of the conversation. But how often is the business’s and the families long term future strategy discussed? The answer is, probably very rarely, if at all.
Succession within a family business is a difficult subject to address and can be further complicated when there are multiple beneficiaries to consider. It is difficult to know how and where to begin, especially when the process involves the transfer of assets from one generation to another, and the older generation is worried about losing control.
A strong family relationship which underlines a farming business can be one of its greatest assets, however to avoid it becoming one of its greatest constraints, it is important to establish the families collective strategy at an early stage, to ensure a viable future.
Succession planning need not be emotive or complicated. By addressing the issue early and sitting around the table with all involved, careful and deliberate steps can be made to identify what is critical and what objectives are required to deliver a successful and sustainable operation of the family business going forward. Ideas and aspirations need to be collectively established so they can form part of the future strategy and be actioned appropriately. This may of course include the transfer of property, shares in a company, a change in a partnership structure or outlining who will take on the farm’s tenancy.
One key consideration is that what may be important in the eyes of the transferor, may not be deemed to be of such significance to the beneficiary. Whilst an inheritance is not necessarily a bad thing, careful thought needs to be given to the future requirements of the next generation, particularly where some siblings may have an interest in the trading business, and others are earning their living by other means.
So, where to begin? …….start talking and address the situation next time you and the family are sat around the breakfast table eating your full English. Try to understand what the various parties want to achieve from the business and where their objectives lie, as this may come as a surprise.
The importance of such discussions should not be underestimated as these could form some of the toughest strategic decisions the family may make for some time. Seek professional advice and get them around the table too, even if this means sharing your breakfast!
It is important to get a good professional team on board early, to assist and take a chairing role to ensure the families objectives are met and a robust and reasoned strategy is adopted. Knowledge of value and tax is vital and the ability to seek advice on the advantages and disadvantages of potential changes to ownership, tenure, business structure and asset transfer will be key if the end goals are to be delivered.
Inevitably, the biggest hurdle is approaching the topic, however for the business and the families assets to remain viable and prosper, it is important to address the situation early before it becomes too late!