Successful planning for the future of any business relies on having a broad view on its succession and deciding on what the route towards that succession might be. For some businesses this might involve an exit plan, for others an opportunity to hand on the business to the next generation, whilst ensuring that current generations have sufficient assets and wealth to retire comfortably and fulfil their objectives in life.

The tongue in cheek title of this article illustrates one of the main issues that we come across in succession planning. How succession is handled in one generation can influence how it is handled in future generations. This can go one of two ways. Either a poor succession for one generation leads to a more determined attitude to succession for future generations and therefore a better outcome or the opposite where, the older generation don’t see why the younger generation should be given the opportunities simply because it was denied to them.

It is often useful to go back in history and to cast through the events that have led the business to where it is now and to look at the key decision points. I have often had discussions with families talking about re-investment, for example, in parlours, robots, milking equipment etc. where the older generation are completely opposed to it. When you ask them what they were doing at that stage of life they tell you they were coming out of an abreast parlour, putting in cubicles and expanding cow numbers!

A big issue in all succession planning nowadays is that life expectancy has increased at the same time that people’s expectations of what they can do in life has also increased. It is not uncommon now to have a 90-year-old father, a 60-year-old son and a 30-year-old grandson, who himself has a very young family all vying for a position in the farming business. Non farming siblings take a very different view nowadays to their inheritance within families and expect a much larger share of equity. This is partly because of the values of land and partly because of the low returns of their own pensions and investments. They often feel disadvantaged compared to farming siblings.

Such things as development land and diversification opportunities have changed the way that farming businesses are structured as well and the way in which income is earned. In the past, if one sibling stayed at home and worked hard milking cows, it was often seen that they deserved the opportunity to inherit the farm. Now they may well be running a property rental and diversified business from the farm without quite the same day to day manual labour.

Tax remains a big consideration and is likely to be something that would need to change in the future as taxation of wealth is likely to become a bigger factor for us all as the pandemic has to be paid for.

So, what can you do about it? The best thing is to form a good team centred around people who understand your business such as consultants, accountants and solicitors and then engage with this team on a regular basis to ensure succession plans are put in place that are relevant and flexible. They can then be updated as things progress and most importantly that everyone has a clear idea of the succession of the family farm. As consultants we often play a pivotal role in co-ordinating this and helping to broach what can often be difficult discussions with family members.

Contact Max at maxsealy@fcgagric.com or your local FCG Office, to look at proactively engaging to develop a succession plan on your farm business.