Getting Stuck in Farm Succession Planning and How to Get Out.

Getting stuck in farm succession planning and how to get out.
We often work with families on farm succession planning who’ve frustratingly been going around in circles for years and have become stuck in the decision-making process. When we start the conversation, it’s soon discovered that there may only be a few small changes to make and that it is easy to become unstuck. For some families it may take a significant catalyst to commence their succession planning i.e. a health diagnosis, serious fallout or a long-held disagreement.

When working in a family business, you’re managing blood relations, finances and a business, and it can often be difficult to get the combination of the three correct. When there is deep respect and love for family members involved, the conversations can be more difficult to have.

What do we mean by getting stuck in farm succession planning?
Families can often get stuck in the decision-making process, when issues are avoided or when discussions go around in circles, sometimes for years, or even decades. An issue may be approached, but if there are disagreements or misalignments it can easily become stuck.

What does being stuck look like?
Being stuck can take many forms, an issue may never be spoken about, or if it is, there is constant conflict over the smallest discussion.

What are the consequences of being stuck?
In our experience, ‘becoming stuck’ not only has consequences on the business, but also strains on family relationships that continue to escalate and mental health issues that arise from unresolved problems year after year.

What can happen to the business?
When families aren’t aligned, a business can go around in circles and major decisions are delayed or put on hold. This can affect a business’s ability to make acquisitions or further develop the operation with new or innovative ideas limiting the business’s productivity.

Commonalities and tools to manage being stuck.
Common areas where we see clients stuck and unable to progress with succession planning are:

Common Barrier Number One:
When an existing generation worry that there will be a divorce event in the next generation, and that they will lose their wealth. As a result, the decision-making process grinds to a halt, sometimes before it even starts.

This scenario may take the SproutAg team two or three conversations to understand that this possibility is seen as a roadblock to the current business owners in that family. While there are many tools available to mitigate the risks for family members against family law events, family members can feel uncomfortable raising the topic, which leads to the family being stuck on an issue they don’t feel comfortable discussing. Each family and family business structure is different, and to enable future growth and to protect the broader family there are different tools available including:
– Marital deed or prenup (although these are not as common in Australia)
– Sunset clause
– Registering a caveat and/or second mortgage.

*Note that every circumstance is different, and that these tools are not recommended for individualised scenarios. For individual advice, reach out to the SproutAg team.

Common Barrier Number Two:
The existing generation wants to keep working on the farm and still be involved.
The next generation can often see the desire for the existing generation wanting to stay involved and not wanting to give up control or take on the next generation’s new ideas. These unspoken feelings can lead to family conflict and can cause families to become stuck. Often there are few roles and responsibilities that the existing generations wish to keep, however it is important to identify these early in the succession planning process and keep them at the forefront of the plan to ensure all parties are accountable.
– Meeting schedules
– Roles and responsibilities map.
– Future organisational chart.
– Employment contract with set roles and responsibilities.

Download a copy of our free succession planning guide on our website here.