Does your farm business have a well-crafted succession plan? If not, the ramifications could be considerable.
It's almost never too early to start developing a succession plan for your farm business. If well-crafted it can avoid a lot of misunderstanding and grief, releasing energy and enthusiasm to drive the business forwards.
Such was the message from a Defra-backed discussion panel earlier this year, involving industry experts and chaired by NFYFC Agriculture and Rural Issues (AGRI) Chairman David Goodwin from Warwickshire.
"NFYFC wants to highlight practical and accessible measures to help start and progress succession conversations," he says. "This issue can affect the whole family if it is not dealt with. Hopefully, we can help to break down some of the barriers."
George Baxter, an agronomist with Hutchinsons in Cambridgeshire and NFYFC AGRI Vice Chairman, with a family farm interest in Yorkshire, feels demand for discussions is rising. "The next generation is pushing quite hard, because they can see the directions farming could take, and opportunities in diversification or new technologies, for example."
In other cases strong land values mean the next generation wants to release capital values, rather than focus on the earning capacity of the business.
According to independent succession consultant Siân Bushell the advice is clear. "Don't bury it and hope it goes away; it won't. Family farms are more at risk from not having a succession plan than any financial, political or weather event."
Too often succession issues are triggered by a death or sudden disability. With no succession plan in place what is already a catastrophe can be made far worse.
Larger estates often see the early inclusion of the next generation, on a shared venture basis, as a way of reinvigorating the business, says Georgina Sweeting from Savills' York office.
The flipside is sons and daughters eager to get involved, but frustrated by a reluctance to engage, notes George. His advice is not to be afraid to pursue other employment, with a view to returning to the farm later. But have the succession discussion first. "Don't leave with a vague hope of returning, there may be a disconnect of expectations, and the opportunity may not be there when you want to return."
"The importance of business and succession planning must not be under-estimated, especially during this time of policy change and transition," adds Ashley Lilley, Savills' food and farming director in west England and a long-time supporter of NFYFC training.
Starting the conversation
There may be no blueprints, but the panel highlighted some key issues. First, get the conversation started. The moment needs choosing carefully – the middle of a TB test is clearly not ideal. But don't keep putting it off and don't let others do the same.
Seek to understand the goals and concerns of all family members, and never assume. Until it is said, it isn't part of the process.
Include everyone with an interest, including siblings who may work off-farm. Omitting them can cause resentment and problems. Some discussions are better one-to-one, or with an unrelated, unbiased chairperson. Include spouses in large family meetings.
Joining the business
A key issue is the unspoken expectation that a person who is keen on farming will join the business at a future date, but little is said of how they will be integrated into the business and if/how/when the business will eventually pass to them.
Wrong assumptions are often made, manifesting years later as major problems, with people often feeling they have wasted the best years of their working lives. Pinpoint what is expected, what can be given, what is wanted, what is not wanted, remuneration and whether the business can support everyone.
Simple issues, like working hours, can be a good place to start. Often these cause big headaches if not defined clearly. Consider who is responsible for day-to-day decisions, buying and selling, and budget and cashflow. Who attends meetings with the accountant and bank manager?
"Be realistic about expectations, but also be sure to get things agreed at the outset, to avoid later disappointment," notes George.
Is everyone united on the direction of the business, the farming sectors traded in, diversification and cash availability? "Ensure everyone knows what everyone wants. Often the expectations of some family members can come as a big shock," says Sian.
Sort out payment, living arrangements, responsibilities and planned timelines for completing the succession process. The business may need adjusting to accommodate everyone's goals, which could take years, especially if scale needs to change.
Hold an annual strategic meeting to review progress and set goals, including a target date for retirement, so it isn't a taboo subject. If the process proves difficult, consider using a trained facilitator.
Choosing between asset growth and cash generation is also key. "It can help when deciding how many can live off the business, and aspirations for developing and growing the business," says Ashley.
Succession plans do not have to be equitable to be fair. "If one sibling is doing the farming, and the others are not, the split can reflect what is earned, rather than being directly equivalent," Siân notes.
Last year NFYFC, with support from Defra and AHDB, produced the video "We Really Need to Talk", highlighting the role of communication.
"Ready and Resilient" is its successor, a guide to starting the succession journey, created by NFYFC with Savills and Siân Bushell, and supported by Defra. It involves training delivered to YFC groups by NFYFC The Curve training experts. Piloted in Nottinghamshire it is now being launched nationally.
Tax and legals
Crucially, tax and legal arrangements should fit the family plan, not vice versa. Agricultural property relief and the switch from EU to UK farm support may be hot topics, which can get the conversation started, but decisions should be based on family goals first, since policies are likely to continue changing.
Passing on the management of the farm business and transferring its assets should be seen as separate things, which do not have to be simultaneous.
Trusts, which can seem a sensible tax strategy and way of defining the future, may not be ideal. "Trusts often show there's a lack of trust," says Siân. "So check why you are getting into the trust and how you will get out of it, because you can easily tie yourself in knots."