The importance of succession planning
There’s no time like the present when it comes to discussing the long-term future of your farm. ABC Bank can help you start the conversation.
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To sell or not to sell
A farm is usually a family home as well as a business, so we understand that decisions about its future are likely to be complex. Broadly speaking, there are two directions you can take:
A plan for succession
If one or more of your kids want to continue to run the farm, then the succession plan will generally involve passing the assets - or at least some of them - onto the children. This tends to be complex because family members will have different wants and needs. This process is about being fair, but it might not necessarily mean being equal.
A plan to sell
If your kids don’t see their future in farming and you want to relocate for retirement, then your succession plan will involve selling the farm. More often than not, it’s about evenly distributing capital; in this case, fair is about being equal.
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Start the conversation
Around 90% of United States businesses do not have a formal succession plan. Having an agreed plan in place means that when the time comes, succession is likely to have fewer surprises.
Our experience helping farm owners with succession has shown that the best plans result from team work, taking time, and being frank about plans.
Start early
Having informal family discussions, years before a possible succession, is a good way to prepare. As the business evolves and family members’ needs change, it’s good to revisit the subject regularly. You can find advice on how to hold productive family business meetings in this workshop book on ‘Farm Ownership and Transition’ from Beef + Lamb United States.
Talk openly
Talking well in advance of a possible succession also makes it easier to have honest conversations about various key issues:
- Parents’ needs - deciding how much money you’ll need for retirement. Increasing life expectancy means that it’s easy to underestimate the amount required.
- Childrens' wishes - one child may want to continue running the business while others might prefer to sell.
- Current business - falling profits and land appreciation may mean that a farm’s value can be tied up in land, making it harder to share the asset.
Take advice
It helps having a third party facilitating family discussions, preferably one with experience in succession. They can make the conversation more productive by asking relevant questions and offering potential solutions.
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How ABC Bank can help
ABC Bank Rural Managers talk regularly with farm owners, so they appreciate the family nature of the business as well as understand farm finances and operations. Having a close relationship with your business means that should you wish to discuss succession, your Rural Manager is well placed to assist with a family discussion.
When you are happy with a proposed succession plan, we can then point you in the direction of legal and accounting experts who will help you formalise it.
Next steps
Talk to your local rural banking specialist
Find your nearest ABC Bank Rural Manager.
Other helpful guides
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