Succession planning special: How farmers should be preparing for the future
With the industry now having an outline of what post-Brexit farming could look like, Andrew Connah at Agricultural Mortgage Corporation and Barbers Rural Consultancy’s Louise Taylor discuss how farmers should be preparing for the future.
Change is not coming to the agricultural sector; change is already here.
And with the Agriculture Bill offering farmers an outline of what post-Brexit policy and payments might look like, farms can now start forming plans for the future.
That was the message from Louise Taylor, succession planning specialist and partner at Barbers Rural Consultancy.
She said: “An important goal for farmers to work towards is having a plan in place to manage their business so it is in good shape to compete in the future market.”
And with the Basic Payment Scheme being phased out, Ms Taylor said this gave an adequate time window to get a plan together.
The plan could include how the business will control costs, improve marketing, adopt relevant technology and innovation, exploit current assets and add value wherever possible.
She said: “But perhaps the most important part of the plan, succession, is all too often overlooked.
“A succession plan is a business plan with the added complication of familial ties, history, emotions, expectations and relationships. These complications cannot be underestimated in terms of their potential impact on the future of a business.”
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Families
She said succession planning was rarely straightforward in any business, but for family farms it was even more complicated, with the link between business assets and the family home.
She said: “They say you should live as though you will die tomorrow, but farm as though you will live forever.
“The farmer often lives in this constant dichotomy between being a business manager, trying to maximise profitability, and a custodian of land, focused on preserving and improving land for the next generation.”
She said it was crucial there was good communication with key stakeholders and everyone’s expectations and ambitions were understood.
“The idea of it automatically going to the eldest son is becoming a thing of the past and there is now more emphasis on ‘fairness’.
“Non-farming siblings hope, or expect, to be compensated, and this can put a huge strain on the whole business and family relationships,” Ms Taylor added.
She said more families were looking for specialist facilitators, as emotions can run high, and it was important to avoid conflict wherever possible.
Agricultural Mortgage Corporation regional agricultural manager Andrew Connah said his firm was often brought into the process for guidance on long-term finance, such as restructuring existing debt.
He said: “Loans can even be passed onto the next generation without being reviewed, meaning there is one less thing to worry about when the handover happens.”
He said it was important to look at strategic opportunities to expand farming activities and diversify.
Mr Connah said: “Diversification into sectors such as property, energy and tourism is a common way of ensuring a farming business can eventually provide a living for farming and non-farming family members.
Opportunity
“For those who have two family members wishing to farm, the plan could involve the purchase of a neighbouring farm, an opportunity which rarely presents itself at the right time.
“This is where long-term, interest- only loans can often help farmers take advantage of such time specific opportunities, allowing them to repay capital when other financial commitments have ceased.”
With interest rates currently at historically low levels, long-term fixed rate lending options can give the next generation security.
Mr Connah said: “Our industry is facing uncertain times, making the need to future-proof businesses so they can more robustly weather whatever storm lies ahead, even greater.
"Whatever you decide, plan for the worst and hope for the best, work in partnership with your stakeholders and banking provider, and remember that everything must suit the family. That is where the future lies.”
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