RENEWED optimism in Australian agriculture has put farm succession back on the table, according to Rabobank succession planning facilitator Kim Lee.
With 2020 hopefully marking the end of, what was for many, a multi-year drought, Ms Lee said in a recent podcast there was pressure and opportunity to reassess the strategic direction of farming operations.
“It’s an exciting time for the industry, there’s been a turn in the season and agriculture has retained its strength during COVID-19 – there’s a positive outlook for Australian agriculture regenerating interest in the family farming business among younger family members,” she said.
The Rabobank podcast, titled Farming Families and Success in Succession, was aimed at helping farming families navigate successful succession; ideally, by beginning the conversation early, using well-structured, healthy communication, shared equally by all participants.
“When the next generation is included in discussions regarding responsibility and accountability early, when the time for succession does arrive, families don’t even realise they’ve stepped into that space,” Ms Lee said.
Clear goals are fundamental
She identified clearly-defined goals as another fundamental of successful succession planning.
“Clarity around retirement for the older generation is crucial, particularly their financial and housing requirements, involvement in ongoing farm risk, involvement in the community and off-farm activities – all considerations which some couples approaching retirement may disagree on,” Ms Lee said.
As a family, she said, it was also necessary to talk about goals surrounding fairness –establishing what was fair, and how a family viewed asset transfer when distribution was not equal.
While financial security and farm viability were often front-of-mind when negotiating succession planning, Ms Lee said maintaining family harmony was the ultimate goal.
“Fairness is largely subjective, so negotiating what fairness looks like can be tricky,” she said. “Succession planning involves give and take, which can challenge family harmony.”
Family culture helps succession planning
She said the unique culture of individual families also contributed significantly to succession planning success.
“There is no silver bullet when it comes to succession planning, every family business is different, and planning needs to be driven by a family, together – not led by what a neighbour is doing, or a culture set by past generations.
“Often, what has happened in the past forms a family’s cultural foundation for the future, and drives succession,” Ms Lee said.
“Some families expect their succession will happen organically, in a will or as it played out for the older generations – but it’s crucial to understand whether that perceived path is something that is a positive, or a negative.”
Good communication streamlines succession
Ms Lee said identifying a family’s culture and how it communicated suggested how streamlined its succession planning could be.
“Every family approaches communication differently – ‘Is communication allowed? When and how does a family communicate? Are questions, challenges and negotiations between family members encouraged?”
Ms Lee said transparent financial communication often eased the succession process. A family’s relationship with money – how money was discussed, how much each family member knew about the business finances – was also important.
She said identifying the discussion criteria surrounding goals, communication and money was imperative, and families often didn’t realise their own personal cultural constraints were threatening succession success.
The podcast explored other common succession concerns arising during the process, including introducing spouses, or even new partners, into the conversation, and the importance of families understanding their business.
“Often there’s a lack of insight into the drivers of a farm business – factors beyond a profit and loss statement for tax purposes.
“When there is a comprehensive account of management performance it gives families a much clearer outlook as to what is actually possible, whether the farm can provide for one, or two generations, whether it can support off-farm children,” Ms Lee said.
“Often families are astounded by what their business is capable of doing, which sets a really strong foundation for planning.”
Part one of Rabobank’s Farming Families and Success in Succession is available at https://research.rabobank.com/far/en/sectors/regional-food-agri/RaboResearch-Podcasts.html, with a second instalment in the series due early June.