Why is succession planning so important?
Planing for succession is a very important part of managing a farming business and the process should be an ongoing topic for families. There are many questions that must be answered along the way, such as how to hand the farm on to the next generation so that families can continue to farm and build on what the parents have spent many years, possibly a lifetime, building.
Failure to plan for succession can cause significant business and family problems. For example, it can lead to the sale of farming assets to settle estates leaving families feeling very bitter and at worst causing breakdown in family relations.
Planning for farm succession allows you to anticipate and prepare for traumatic events such as early deaths, divorce, desertion or a family member deciding to quit farming. Good plans provide:
- enough time to generate an income for the retirement of those leaving the business;
- enough time to develop the farm to support the incoming generation;
- plans that can help to see the family farm continue as a viable business;
- strong motivation for the younger generation to contribute thought and energy into the farm with an eye to the future; and
- incentives to explore and develop off-farm alternatives for children who will not pursue an alternative career off the farm.
A positive motivation for planning is that some parents do not wish their children to go through the trauma they experienced taking over the family farm from their parents, especially if the process involved breakdowns in family relations.
The following comment expresses some of the frustration that is caused by lack of succession planning.
'The idea of each generation having to buy the farm - having to buy out a brother's share, explains why so many farm families that have been farming for three generations have been struggling. The son inheriting the farm and buying out his brother's is really in no better position than the previous generation. There needs to be some new thinking in terms of business structures to allow the million-dollar asset to provide a better standard of living for farm families. There's got to be a better way, surely?'
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