The secrets to smooth succession
27 June 2019
Starting to think about your succession plan? Mike Stephens, agricultural consultant and Director of Meridian Agriculture in Victoria, outlines what’s needed to successfully hand over the farm.
Mike’s been advising producers on succession planning for 40-odd years and is currently completing his PhD on the subject. At a recent MLA BeefUp Forum in Mareeba, he told attendees a story he says is far too common.
“I was part of a family conversation about succession when the husband looked at his watch and said ‘oh dear, I have to go and check that cow that’s calving’,” Mike said.
“The air was pretty thick so I opted to go and help him. We jumped in the ute and drove out to the top of hill where he got out calmly and just stood. I said ‘where’s that cow’ and he told me there’d been a lot of non-existent calving cows over the years.”
Mike explained this was a classic example of avoidance and unfortunately, that seems to go hand-in-hand with succession planning in the farming game.
At the Forum, Mike presented a recipe for smooth succession backed by both years of first-hand experience and comprehensive analysis. His research included detailed case studies which were co-funded by MLA Donor Company (MDC).
Be proactive, not reactive
Succession of a viable farm business is a financial reality for only a few, Mike explained. In fact, analysis of ABARES annual cash receipts from farm businesses suggests only 30%. A Meridian survey of professionals, who between them advised 6,500 farm businesses, showed most producers don’t have a succession plan and are reticent to develop one.
Mike’s first message was to start the conversation early – don’t wait for a catastrophe to force your hand.
“It’s never too early to start planning for succession by building the business,” he said.
“If you do that, you have choices. Succession is a very long process.”
In it for the long-haul
Mike provided financial information on the fictional case study, the Strawman family, which drew on Atherton Tablelands financial information provided by Bush Agribusiness. This demonstrated that building a business for succession is a long-term project.
He said there are generally three aims of family farming:
- having the funds to enable retirement
- having a viable farm for the children who want to farm
- having sufficient funds for the non-farming children to be happy.
“Often a good plan is one where nobody is overjoyed but nobody is harbouring resentment,” Mike said.
How to get started
“A succession plan is how you move the responsibility for management, for getting the work done and eventually ownership from one person or a group to another person or group.
“It might start by giving some serious management responsibility to a certain family member, then move onto making that person a genuine partner, then have them take ownership of the business separate from the land and then work out how they can buy the land,” he said.
“By taking this stepped approach, you can allow them to start to buy out siblings early. No two plans are the same and there’s a whole range of things you can do from an early stage.”
According to Mike, smooth succession requires:
- building and maintaining relationships
- open and honest communication between all family members
- managing expectations
- building a business capable of delivering
- understanding the needs wants and aspirations of each family member in each generation
- choosing the appropriate business structure
- appointing a team of advisors.
MLA BeefUp Forums
These forums are held across northern Australia and provide producers the opportunity to hear about the latest on-farm research and development, gain industry insights and have a say on future research priorities in their region.
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