So your dad is getting grumpier as each year passes but your mum’s scones are still the best in the world.
They were really happy when you got married but things have definitely got a bit icy now that your wife understands the farm accounts better than they do. At her urging you casually dropped the words “succession planning” into the conversation last week over a cup of tea, which got the response from your dad: “Do you want to dig my grave as well?”
Your mum hasn’t made you scones since. Sound familiar?
As the older generation live longer and in better health, and the younger generation have more access to information than ever before, farm succession planning is getting trickier.
With Covid-19, the solution of disappearing on an OE for a couple of years might also be gone.
So how to go about it?
Firstly, work out if your parents want the name on the letterbox to be kept the same, and let them know you want it that way as well.
Make sure they understand you don’t see it as a right or an entitlement, that you know that they worked hard and made sacrifices to buy/run the farm and that you and your spouse are prepared to do the same. And that you hope your children will take it on after you.
The process isn’t just about you – it’s about your parents and their grandchildren and maybe even their great grandchildren.
Once that is sorted but before you make the phone call to accountants and lawyers there has to be an understanding of what all of you want out of it.
And this isn’t about money – it’s about lifestyle. Do your parents want to stay living on the farm? Do they want to stay helping out, and in what ways? Do they still want to see the accounts and be part of the financial management?
Letting them do the fun stuff keeps them connected, feeling worthwhile and having a better and more enjoyable lifestyle as they get older. Your dad may want to keep driving his favourite tractor and your mum may want to keep looking after the calves in the spring, but they might be more than happy to give you the task of finding the money to pay the bills every month and doing the GST.
They may want to come to management meetings but it might not be because they want to control what you do – they might just want to feel included and know what’s happening.
Or they might want to be paid out and leave you to it so they can finally buy that campervan they’ve always wanted and tour New Zealand for several years, and then buy a house in the town where they are close to doctors and friends.
Everyone is different, and finding out what mum and dad really want will help set up a succession plan that works for all.
Make sure your spouse is included. Sure, in older generations mum didn’t pay the bills or go to those serious meetings with accountants and bank managers. However, times have changed and wives and husbands now have equal responsibilities – something that the older generation can have a problem with.
Including spouses, either male or female, also leads to more heads around the table to think things through. Sure, divorces happen but deaths happen too. If you die, and, let’s face it, farming doesn’t have the best statistics, your spouse will inherit and surely you and they will want to be up-to-speed with the farm and not estranged from the family at such a difficult time.
Got that sorted? The next step – seek professional advice, and this is not as easy as simply picking up the phone. Whoever you use will work for their client – is that going to be you and your spouse or your parents?
If it is your parents they and the advisor will work out a succession plan and you will have to agree to it. If it’s you then the opposite will happen. It might be best if you and your parents are the clients equally. Just a thought.
Find the right advisor. Make sure whoever you chose is someone who does this sort of thing in the dairy industry a lot. They know what works and what doesn’t and are keeping up with how farm and stock values are changing.
Now that you have started make sure the succession plan is a priority. Don’t start it and then let calving or something else take over. Get it sorted quickly so everyone knows what is going to happen, how, and when.
Make sure meetings include everyone – even if mum isn’t keen make sure she attends – and all of your brothers and sisters and even the grandkids if they are old enough. Introducing kids to business planning can never be done too young. Making sure that everyone is at the meetings means information is not passed on second hand, and that everyone understands exactly what is going to happen. Don’t let anyone say “it’s okay, whatever you all decide I’ll go along with it” because you can be sure that something will not be okay and, when everyone realises, it might be too late.
Expect through the process to learn a lot more about your financials, other opportunities such as off-farm investments, and legal stuff like enduring powers of attorney.
Succession planning makes everyone focus on the business and where it is heading – not just to get to drying off and how to winter the cows but for years into the future. It’s a good thing, and the lessons you learn through the process should make you better at examining both the farm’s future and yours.
Make sure the succession plan you all come up with is a living document – not something that is written down and then filed in a drawer. Things change, and what sounded like a great idea a couple of years ago might not work any longer. Health needs change, stock values change, the will to get up every morning to milk cows at 4am might change.
And don’t fall into the thinking that since you are going to be “given” the farm one day when both of your parents die you should work for them for free. Don’t laugh – it has happened on a lot of farms.
Equally, don’t let your parents think that it’s okay for them to face financial insecurity so you can fulfil their dream of a second and third generation on the farm. If the farm can’t pay you a living and give them a financially secure future as well, no amount of succession planning is going to work. Instead relook at the business and find a way to get enough money out of it for everyone.
Successful succession planning relies on a clear vision and purpose for the business and willingness for everyone to trust and support all involved. The aim should always be to keep your family together. Remember, those scones are worth it.