Succession occupies ample space in the minds of farming families. Good or bad, it takes time, energy, and money to do it well. It can also take those same elements not to do it well. The aim of taking a proactive long-game approach to succession is to provide stability both for the business itself and the people in it, now and in the future.
Even if a formal succession plan seems far off, there are always steps you can take beforehand to prepare and set the business up for a smoother transition in the future. Anyone near or in a farming business can take responsibility for contributing to a successful succession.
- Habits are just actions with discipline
Discussions about succession happen over time, whether with family, accountants, or consultants. Keeping notes on these conversations—agreements, expectations, and ideas—can provide clarity and help avoid misunderstandings down the track.
Conversations had at points in a business cycle, like when a new generation comes back to the farm and starts working, general discussions about timing, changes, and how things will work could all be noted and used as a basis for launching talks in the future. Managing people’s expectations is a large part of the process, so communicating even basic expectations or realities is good practice.
Getting in the habit of having these conversations regularly and with a variety of people can mean the understanding of all parties grows over time. Succession pressure can be contained because it’s done methodically and consistently over time. It is viewed as another element of what we do in business to be successful.
Recording these conversations in a general way can be an excellent tool for picking them up in the future. Use a style that reflects the family, but at least showing the efforts made can demonstrate commitment to getting it done.
One to start with is when the new generation comes home and starts working in the business, and that work has some permanence. Talk generally about wages vs. drawings vs. allowances and the long time frames, and be honest about debt, scale, and off-farm commitments. A farm can’t be everything to everyone but can be something to all. Also at this time discuss how non-farming siblings will be catered for – this should not be left too late.
- Data Assisted Decisioning
The above definition is ‘collecting data based on your business’s performance and transforming that data into actionable insights’.
Understanding a farm’s numbers is critical. Keep all the records, whether financial metrics, operational efficiencies, or capacity for growth.
One component of collecting data that can help in the process of succession is recording and understanding the personal costs a farm business pays for its managers. What you ‘earn’ personally wouldn’t just be a drawing figure, but home repairs, health and other personal insurances, and utilities. All families are different in what they choose to cover. However, leading into retirement, understanding what costs you generate to run a household can be essential for establishing how financially independent you can and want to be post-succession. It’s often an initial question that may get asked by a professional, and if you are scrambling to try and piece it together, you can cause yourself stress and delay essential conversations.
Also, adding up all the fringe benefits provided allows the true salary package of a family employee to be understood. We know that the actual value is typically way higher than what working family members believe it is!
This can help inform fair and transparent succession discussions in the future.
- Investing Regularly, Even in Small Amounts
Setting up regular investments, such as superannuation, shares, managed funds, or property and contributing small amounts often can build financial independence and sustainability for future generations.
Often, it is paired with professional advice, but establishing the routine of building wealth over time without a considerable cash flow impost on a farming business at the tail end of a career is a sustainable way to cover future payouts and continue the conversation of succession on the farm.
Off-farm wealth is also critical when considering how to cater to non-farming siblings. You are highly unlikely to accumulate enough to catch the value of the farming assets, but everything helps and gives you some options.
Money makes money. And the money that money makes makes money (Benjamin Franklin).
- Consider Insurance Early
Farms carry financial risks, and personal insurance can help protect family members and the business. Life insurance can ensure that debt is covered, or family units are provided for. It’s often cheaper and easier to set up early in life, so seek advice regarding appropriate policies or contribute and self-insure through savings.
- Develop Future Managers
Good managers and decision-makers don’t appear overnight – the skill of decisiveness can be honed over time. It needs investment, exposure and opportunity. If you genuinely see a pathway forward for the farm business to transfer to the next generation – provide those opportunities, invest in that course, invite them to that seminar, and expose them to meetings with professionals. A future generation doesn’t necessarily need to be ‘on the farm’ full-time, either.
The best decision-makers have often evolved because of the constant scars of being exposed to opportunities to make mistakes, course correct and figure it out. Cast the net wide and help them grow.
- Have Open, Ongoing Conversations
Avoiding discussions about succession can lead to frustration and unrealistic expectations. Regularly discussing the business—its challenges, opportunities, and future—ensures everyone understands what’s involved and can make informed choices.
This includes being honest with family members who are not directly involved with the business. If someone completed their secondary and tertiary education away from the farm and has lived and worked away since, from their point of view, it can appear all roses. New block, new lease, new car, new house or renos. Not understanding that those investments have come at the cost of others, such as delayed contributions towards retirement or forgone wages.
What you want your farm business to do today can determine its future direction. Providing equality for all family members may mean taking a different approach, focusing on farm growth.
- Keep Learning About Succession
There’s always more to learn. Attending seminars, meeting with professionals, and understanding business structures, legal requirements, and financial planning can help you make informed, confident decisions.
Don’t let the round-table BBQ conversation define your understanding. As important as these are, there is often more to them than what you can cover in an evening of potato salad and red meat.
Also, rules and designs can change. Thinking that the succession in front of you must look like the succession behind you can limit your success and reduce the sustainability of the outcome.
Be curious to know more.
- Understand Communication Styles
Good communication is key to successful succession planning. Tools like personality profiling and communication assessments can help improve discussions and ensure everyone feels heard and understood.
Adjusting how you make a point or approach a conversation to account for the different types of people in your business can mean engaging, not disengaging, with the ones you need to get this job done.
Flex like a gymnast and communicate like a sharpshooter.
- Mind over Matter
Succession planning is a process, not an event. Approaching it with a constructive mindset, rather than seeing it as a challenge akin to poking yourself in the eye with a fork, does not help move the dial forward in a constructive way.
While you can’t control everyone’s reactions, you can demonstrate leadership with your own, so sit up, pay attention, and proactively engage with the process.
It’s a privilege to be part of a business that spans generations. The responsibility to deliver a succession is one many wish they’d had the chance to deliver. Planning well ensures that legacy continues.
- Cast the net wide
Taking advice, for this generation of farmers is not uncommon. You don’t have to go to a professional with all the answers for your succession. Investigate the opportunities, understand the financial implications, and consider the legal implications of various suggestions. As a family, decide on how you want to handle the personnel, as farms are just people with land. Without the people, there isn’t much of a farm.
You don’t have to eat everything you catch.
Final Thought
Be proactive, ask questions, and take small steps today. Succession is an ongoing process; every effort you make now helps build a strong foundation for the future.
