A recent Baker and Associates’ weekly AgLetter* included Rob McCreary’s thoughts on succession planning, given at the Wairarapa Farm Business of the Year Field Day.
1. Rob’s farther was an academic. The greatest thing his father passed on to Rob was no expectation of succession!
2. You have to define what you mean by succession vs inheritance. In Rob’s view, succession is about investing in the energy, youth and enthusiasm of the next generation. It’s also about handing on your experience and being a mentor to the next generation. Inheritance is simply getting what’s left at the end.
3. It’s important to pass on some debt, as well as assets.
4. Make sure the kids have a business or a part of a business that they can stamp their mark on.
5. Because children work in their family businesses, there is an automatic expectation of succession. In older businesses, this expectation is probably a lot stronger, and therefore needs a lot more management.
6. If it’s important to treat all children equally, their net equity will only be equal for one day. After that day, their own business skills and external forces will change what that equity becomes. This is a fact of life. There should be no come‐back.
7. For a successful succession plan, your business needs to grow. Concentrate on improving the things that increase income. Don’t over‐capitalise. Buy more land. Spread your business.
8. Carry out your succession plan as early as you can. This gives your kids more opportunity to do something with their own equity.
9. All the young people I’ve come to know who have been given this type of help have driven their business further and better than the last generation.
Succession is a generally complex which will be different for every business.
One measure of successful succession is that all parties are still talking to each other when it’s done.
If one or more offspring wish to farm and others don’t, it’s easier if there’s some off-farm investments for the latter. Not all farms generate enough income to enable this and many prefer to put any profit back into the farm.
Some people think it has to be equal to be fair, others are sure that fair isn’t always equal and equal isn’t always fair.
Regardless of which side you take on this, point 6 is right. Even if all are treated equally their net equity will only be equal ont he day they get it. After that it’s up to them.
* You can see more about the AgLetter and how to subscribe here.
The AgLetter is a weekly publication, which provides timely management and marketing information to sheep, beef and deer farmers throughout the country. Established in 1986, the AgLetter has become a valuable source of information and humour for a large number of subscribers stretching from south Auckland to Southland.
Each week, the AgLetter provides an overview of:
- Topical management advice
- Industry Issues
- Store market prices
- Export schedule price
- Market analysis
Detailed prices on export schedules and store sales are provided.
In addition, special topics are covered each week that may range from stock trading profitability analysis, fertiliser price and product reviews, industry developments such as carbon trading, new financial instruments or drench resistance. . .
It’s well written, easy to read and informative.