Starting early the key to smooth succession

When it comes to farm businesses, starting conversations around succession early is key to achieving the best outcomes for the whole family.

According to the succession planning specialists at Proagtive, farming families taking a well-rounded, proactive approach to succession are far more likely to create fair and favourable opportunities for all parties involved than those that leave it until further down the track.

Finding out the financials

Proagtive’s General Manager, Jess Cavanagh, said good succession planning starts with taking stock of the financial performance of the business early on to understand what’s possible into the future.

“Families need to consider the historical financial performance of the business, as well as what its scope is to produce into the future,” Jess said.

“It’s also important to distinguish between these two aspects – just because the business has performed a certain way in the past, doesn’t mean that with some help it can’t perform better in the future.”

In particular, Jess said unlocking new opportunities for parents and children can be made possible if the current and future performance of a business is determined early on in the process.

“The financial performance and viability of a business will have a huge impact on succession planning, as it allows a lot of flexibility to create opportunities – for parents who need to facilitate a retirement strategy, for the next generation continuing on in the business, and for the next generation who have chosen other paths,” Jess said.

“Having the desire and opportunity to create early opportunities for children who are choosing to not be involved in the family business goes towards creating some level of fairness between siblings.”

Planning for profit

Understanding business performance also allows families to adjust their business plan to ensure its profitability into the future as the succession plan comes into play.

“By taking a look at your business performance early on, you can also create a lot of scope around what the future of the business might look like,” Jess said.

“This could be expansion – if the business is financially producing in a way which allows it – or it could involve significant improvements or changes to the way the business is run, because often opportunities are identified outside of the current business model.”

A comprehensive business plan that considers a range of business purposes – from financial to personal – is essential if families want the business to succeed into the future.

“When we talk about the future of the business and succession, a business plan that falls inside a succession plan is really integral to achieving whole family outcomes,” Jess said.

This business plan needs to consider financial, personal, production and even environmental goals.

“Families who engage in succession planning are making a conscious decision for the business to continue on to the next generation, and consideration of these factors assists in allowing this to happen.”

According to Jess, defining the current and future state of the business sooner rather than later also gives families the time they need to build the business to its full potential and execute their business and succession plans well.

“The earlier families engage in conversations, the longer they have to achieve their financial and non-financial goals,” Jess said. “

For parents, this means they can really spend the time they need to build a financial bucket for retirement.”

Every voice counts

Understanding that each family member needs to voice their unique goals and visions around the business is critical to laying solid succession plans.

“We have the best success when families reach a vulnerable place and share what’s really important to them,” Jess said.

“The purpose of the business to a family member not directly involved in its operation is going to be completely different to someone who is engaged in the business.

“Once we can assess what’s important to each family member, building outcomes to support those priorities is possible.

“That’s why with families who have great communication – or an ability totransform the way they communicate with each other – we can help to facilitate great outcomes.”

Start talking Starting the conversation now around succession can play a vital role in ensuring the best possible outcome can be achieved for every member of the family.”

Parents deserve to have the retirement they would like to have – they’re the reason why we’re here having this conversation, and why the next generation gets an opportunity to be involved in the business,” Jess said.

“Starting the conversation early means there’s lots of time to build opportunities for all family members, whether their chosen career means playing a part in carrying out the family farming legacy or not.”