Get in early with succession

Get in early with succession


Agribusiness
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IT is important to communicate and plan early when it comes to succession planning.

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IT is important to communicate and plan early when it comes to succession planning.

That was the key message from Bedbrook Finance director Simon Bedbrook at the 2013 Liebe Women's Spring Field Day last week.

According to Mr Bedbrook, family farming businesses were not discussing their future plans for succession, and often avoided the topic, hoping things would sort themselves out.

Mr Bedbrook said the difficulty with succession planning was getting people to the table to talk and successful planning required active participation from all parties.

"If you can start the discussion early that is very important, if you have got members of the family who do not want to discuss it you have a problem you need to sort out," he said.

Mr Bedbrook said it was important to treat family members as non-family members throughout the succession planning process.

"If you have a son or daughter coming back to the farm, you are getting into partnership with someone," Mr Bedbrook said.

"I see some incredibly smart, intelligent farmers who make incredible farming business decisions but make incredibly poor decisions when it comes to their own family because they can't communicate.

"They make decisions with family members that they would never make with somebody else."

In his experience, Mr Bedbrook said parents, particularly fathers, in family farming businesses were often reluctant to leave the farming lifestyle and were concerned about their role after farming.

And those parents that remained on-farm often felt financially insecure and were unsure of their roles within the farming business.

"The fact is that Dad needs to be honest," he said.

"I don't think it's that they are trying to be deceitful, I just don't think they come out and say what they are actually thinking and that is a big issue.

"I think we need to encourage the men to open up and actually say what it is they are scared about in succession planning."

Mr Bedbrook said an ageing population meant parents were living longer and as such it was the responsibility of the farming business to provide for them financially.

Mr Bedbrook said aged care was increasingly expensive and that in an ideal world farm businesses would have enough off-farm assets to look after parents independently of the farm business.

"Its not just for the financial security of the parents, it will probably be used for non-stabilisation down the track," he said.

Mr Bedbrook said often when a son or daughter returned to the farming business they sought control and brought new ideas in conflict with the parent's line of thinking.

He said the next generation and their partners were concerned how they would fund the older generation's retirement.

According to Mr Bedbrook it was often difficult for partners, who felt they were in an uncomfortable position if the son was paid a token wage.

He said if the couple did not have off-farm assets, the couple were likely to feel financially insecure.

"They are in a difficult position because their whole financial position is tied up in the farm and that can be uncomfortable," he said.

As part of the succession planning discussion it was important to address the position of non-farming children.

"I think what historically happened was that the non farmers said we don't care, we understand eldest son gets the farm, but that is starting to change now," he said.

"Non-farming family members are starting to question whether one sibling gets it all because the numbers are getting bigger and the capital base is getting bigger."

Mr Bedbrook said it was also important to address divorce in discussions as it was a growing phenomena and was a legitimate concern.

"It has always been an issue but more so in the last 20 years," he said.

"The issue is when you are in partnership with the daughter-in-law and she is part of the family and you attempt to protect the business against divorce, she is going to not feel part of the family.

"What you have to do is discuss it because there are ways around it."

Mr Bedbrook said if a daughter-in-law was removed from ownership structures, the farm business had an obligation to adequately provide for the son and wife in terms of a market wage, and some money for an off-farm investment should be allocated.

"It doesn't have to be big but it does have to be something," he said.

"All those things have to be talked about because it is a two-way street.

"It is a partnership that you enter into with a son or daughter-in-law and I don't think it is fair not to discuss them.

"It is a big issue, it is touchy and is a difficult one to work through."

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