Sowing? Check. Harvest? Check. Transition planning? Crickets. While it’s a crucial part of your farm’s operation, transition planning is often left off the checklist. As farm asset values continue to rise, striking the balance between compensating family members who work on the farm with those who don’t is crucial.
These days most farming families have a vague, verbal idea of who will take over the farm. But life happens. Children move away, marry, or start their own businesses. Now what? Troy Constance, CEO of Sprout Agribusiness shares how they guide families through the all-important succession plan.
The Sprout Ag team has worked with hundreds of family farms over the years to help with what they prefer to called 'transitional planning'.
A transition plan captures the essence of who will get what, when and how. It can be a balancing act of juggling conflicting demands and circumstances; and there is a lot at stake - the future of several parties.
With goals, dreams and hopes on the line, it’s certainly not an overnight process that requires mapping out each person’s desires, forming a written plan, gathering everyone to the table and ensuring every voice is heard.
It’s one thing for farming families to map out their aspirations and ambitions for the future. It’s another to put them to the test. Do your goals match the game at hand? How’s your cash flow forecast stacking up? What happens to that Veuve retirement mum and dad dreamt of when the farm’s only running on a VB budget?
It can be a difficult task to navigate, but you don’t have to go it alone. Troy Constance shares how the team supports families long after they leave the discussion table.
“We always do an in-depth analysis of your finances and cash flow over five to seven years because assessing your cash flow forecast is crucial to understanding what the farm’s annual costs will be,” Troy explains.
Putting everyone’s desires through a range of scenarios, tests and business plans helps families understand at what capacity the farm should grow, as well as the best time to hand over the reins.
“It’s great to have goals - maybe you want to triple the farm size in 10 years? But if the business analysis and cash flow forecast predicts this goal will send the farm broke then we can make adjustments sooner rather than later,” Troy says.
“If your goal is to support your parents in retirement, we help work towards this in a way that ensures they, and the farm’s operations, are well-looked after.”
With everyone’s intentions looked at through the lens of compromise, acceptance and negotiation, Troy reassures most families find themselves in a strong position.
“We find more often than not that the tests prove the value of keeping the farm in the family for generations to come,” Troy says.
Even with a plan in place, the process doesn’t end when the table is vacated. Change is inevitable and the live document should be continually updated.
So next time you hear someone nonchalantly declare ‘the girls will get super and a house in town and the boys will take over the farm’, take a moment to consider - does that really work for you?
Independent mediators can offers an objective link between the goals and challenges of two generations.
Whether it’s the lights left on again or yet another coffee cup left strewn around the house, no family is without conflict. When it comes to family farms though, there's a lot more on the line than just a lecture from dad about lights and the cost of electricity.
“Conflict generally occurs when we’re working with families on a succession plan,” Troy says.
“Struggles between the generation handing over the farm and the one taking it on, and conflict over who gets what and what those not on the farm will receive are the primary reasons for dispute.”
Like any business, tackling conflict early and efficiently is crucial for the family farm’s longevity. A confidential mediation sessions gather everyone to the table, identify individual styles of conflict, and allow each family member to voice their own issues, interests and needs.
It can be a delicate and complicated process, but with negotiation and solutions shared.
“Our ultimate goal is to see families continue doing what they love - running the family farm for years to come,” Troy says.
Weighed with the decisions of every generation, there’s certainly no shortage of baggage rolled into today’s farming operations. There’s one strategy all successful farming families abide by - they treat the farm as a business.
“If you don’t factor in transition planning as standard work you do on the farm, all too often you’ll find yourself facing tensions and disputes,” Troy cautions.
Commonly, those sources of conflict arise between siblings involved in the farm’s daily operations and those who aren’t.
“Sibling feuds can really escalate if not dealt with early,” Troy says.
“The key is an extensively discussed, clear succession plan that actually incorporates these concerns and tensions.”
Approaching the farm’s capabilities and limits from a business perspective is key to a more successful, unified family farm today, tomorrow and years to come.
Sprout Agribusiness is a professional services firm for the Australian agricultural industry that has a whole business approach to succession planning. They pride themselves on helping many clients set up a succession plan that allows the family to grow the business into the future.
For more information, you can contact your local Sprout Agribusiness representative via their website below.