Succession Planning

Farm succession planning, or more importantly the lack thereof, is an important issue the world over, and the subject of several international studies. It receives little or no attention in most formal farm business planning.

Succession planning in agriculture is a particularly unique problem as older family members tend to find it difficult to hand the farm over to their successors and do not plan properly for financial or taxation purposes. This is reflected in the high average age of farmers in most surveys, although it is fair to suggest that these surveys tend not to recognise younger, more junior partners in farm businesses nor the management input of younger family members.

Several factors may hinder succession planning decision-making, including:

  • The low profitability of many agricultural units.
  • Uncertainty over the future economic performance of agriculture in general.
  • Replacement of labour by mechanisation and capital investment.
  • The high value of agricultural land, houses and buildings.
  • A lack of communication between family members.
  • Competition from better rewarded careers for younger family members.
  • The personal concerns of older family members and their inability to 'detach' themselves from the farm.
  • Successors being less knowledgeable about agriculture, perhaps due to having worked away from the farm.

In order to make a meaningful effort to plan farm business succession, it should be considered a long-term process, and planning should begin at least five to 10 years ahead, and ideally:

  • It should be integrated into inheritance and retirement planning and form part of the farm business plan.
  • Everyone's wishes, ambitions and concerns should be taken into account; frank, open communication should be encouraged.
  • Professional advice from solicitors, accountant, banks and consultants should be sought, restructuring the farm business to cope with the needs of all family members concerned.
  • Some kind of formal plan or strategy should be formulated to follow and review regularly.