Get smart about succession

Get smart about succession
Succession planning in the rural sector is one of the most important issues families deal with and can also be one of the most confusing.

Succession planning in the rural sector is one of the most important issues families deal with. It is also one of the most confusing and one that is often dealt with in the wrong way.
My advice is – don’t start by focusing on the transfer of assets. Firstly make sure you have a successful farm business that works.
We often put farming practice, business management, governance and succession into individual compartments as if they are mutually exclusive. They’re not and need to be considered as a whole.
Because if the management of your farm business hasn’t evolved and governance isn’t in place what value are you really transferring? So the best place to start succession is with management – not ownership.
Begin by identifying what does your farm business need to operate successfully? Questions to think about include
• What are the goals for your business, family and future generations?
• Are you creating an asset for your grandchildren and their grandchildren?
• Or do you just want to sell up and have a blinder of a retirement?
It’s best to have someone else help you to establish your goals as that person will be able to ask the questions that need answers but which you don’t want to ask.
It’s best to use someone who doesn’t know too much about your business/family or the personalities within it.
The intent is to work out what you all really want, and communicate this and help you understand this as a family.
There may be more than one dream/desire in a family so understanding these differing desires means you can make your farm succession plan work for all involved.
Determining goals helps you move to step two: outlining the rules of engagement for making decisions, such as meetings and individual roles. Consider what skills do family members bring to the business and how will they best fit in to your successful farm model.
For example does your son/ daughter have the skills to develop someone else’s business? Or will they be silent partners? Outline descriptions of responsibilities for each person.
A framework helps guide you through the good and the bad times as you reach your end goal.
By establishing your goals, business model and how the family members will fit into this helps you decide the all important structure for transfer of assets. This may involve shares or one of your children eventually purchasing the farm off siblings.
Remember, there is no true succession without good management and good management requires governance.
You will have nothing to manage if you can’t produce effectively and future generations with have nothing to own if you don’t make it sustainable.
To ensure we continue to build prosperity in New Zealand farming we need to learn how to integrate the past with present capability and plan for potential. Like a family heirloom, good or bad succession will be passed through generations.
There are no right or wrong answers but it’s good to have an idea of where you want to go and what experiences you would like your family and business to have along the way.
This article was brought to you in association with the following businesses…

Related Posts