Taking a Structured approach to Succession Planning
By Phillip “Dibbo” Dibben
“Five Steps for Succession Success is a collaboration between Kelly Kelly Legal and Financial Services SA”
“I feel we have nothing to show for all our years of hard work. The farm will most likely be left to our kids, and while we want them to be financially secure, we need financial security too – especially in our retirement”
The fear of letting go, concerns about a fair day’s pay and feelings of being left out are among the worries most, if not all, family members will experience when it comes to succession planning.
Typically, family farming businesses involve the whole family, so it’s important to take a logical and structured approach to determine how the business will continue when one generation hands over to the next, and what that may mean in terms of inheritances.
Succession planning is crucial for protecting the needs of your family and working towards a successful handover for the family business. Taking a structured approach and considering the needs of all family members is vital. So…
Who should be involved?
When it comes to succession planning, it’s important that all family members have their say – brothers and sisters, sons and daughters, sons and daughters-in-law and grandchildren. For many families, this can be among the greatest hurdles. Without inviting open communication and putting all opinions on the table, there’s a chance frustration, and often resentment can develop at the expense of achieving positive outcomes for all. Not only that, but when everyone gets the chance to have their say and be listened to, solutions are often put forward by family members who may not have had their voice heard previously.
It’s important to recognise that each party will have a different approach to decision making due to inter-generational differences or different personality types.
There is also likely to be wide ranging differences in experiences – tenure and hands-on experience gained from working the land as well as tertiary agricultural qualifications and business knowledge. All types and levels of skills need to be considered and respected as part of overall succession planning.
Finding the balance
Finding the right balance for your family is the key, and it will involve weighing up the needs of family members with the long-term goals for overall family business. To achieve balance there will be negotiations and compromises. This is where trusted professionals, including your financial planner and finance manager, solicitor, accountants or stock agent can provide an arms-length perspective that can help you to overcome challenges so that you can plan holistically.
You will need advice from a number of professionals who have specialised succession planning knowledge and who will understand the complex needs of individual family members as well as the importance of achieving positive outcomes for the business from a tax, legal and cash flow perspective. Similar to having a board of directors, your team of professionals can act as knowledgeable but impartial sounding boards, able to help you make the best possible decisions. Among the areas of valuable counsel is understanding key documentation including Partnership Agreements and Business Plans.
Most importantly, professionals are adept at opening up difficult discussions and managing conflict. Independent facilitators are able to hose down emotion to maintain constructive and productive discussion. Their skill lies in getting results which consider the needs of all family members – a balanced objective that considers individual needs as well as the overarching long-term goals for the business.
One thing is certain . . . circumstances will change.
Change is inevitable and being open to change is important for achieving outcomes. It can be difficult for family members to understand what the future may bring, and these scenarios need to be discussed – often. Regular meetings with all stakeholders should be scheduled, and each meeting needs to have a purpose such as weekly operational Toolbox meetings, monthly Business Planning or Advisory Board meetings and Quarterly Review Meetings.
Regular meetings provide opportunities for family members to learn more about the business, its current performance and long-term goals, so that they may become involved in joint decision making. Perhaps most importantly, they offer a platform for open communication about shared futures. Inviting professionals to join family members at meetings provides a forum for asking questions and receiving qualified feedback on ideas, suggestions and opinions about the future.
At Financial Services SA, we have a specialist skills in helping family farming businesses implement succession plans to make the most of their personal and business situation. Dibbo has been helping primary producers and family business owners in rural and remote locations for more than 30 years.
If you would like more information about starting the succession planning process, I invite you to contact me today on 08 8253 2906 or email firstname.lastname@example.org.
Five Steps for Succession Success Articles
- Step 1: Setting Expectations Great expectations | A successful strategy for your family and your business
- Step 2: A Structured Approach Everyone at the table | We thought we were doing the right thing…
- Step 3: Identifying Everyone’s needs and concerns Walk a mile in their shoes | Planning a seamless transition from one generation to the next
- Step 4: Strategise What’s fair is not always equal | Horses for courses
- Step 5: Implementation Head in the sand about the future of your farming business?
Read more about Step 2: A Structured Approach – Business structures and succession planning by Kelly Morgan (Kelly Kelly Legal)
Working in collaboration for a number of years, Financial Services SA and Kelly Kelly Legal offer insight and expertise in rural and family farming business succession planning. Accustomed to opening up meaningful discussions, we cut through technical-talk in favour of straight-talk, to offer integrated solutions that consider the often-complex nature of succession plans to incorporate business transition arrangements, wills and estate planning and retirement and superannuation planning.
The Kelly Kelly Legal team provide advice and representation across a broad range of legal areas including Deceased Estates, Employment Law, Family Law, Farming Leases, Liquor Licensing, Personal Injury Claims, Wills & Succession Planning, Commercial & Business Law, Conveyancing & Property Law and Criminal Law.
This advice is provided by Phillip Dibben under Financial Services SA rural business consulting services.
Phillip Dibben is an MFAA Approved Credit Adviser, including SMSF lending, and is an Authorised Credit Representative with Riverland Lending Services Pty Ltd, ABN 37 1415 814 080 ACL 391825, and is licensed to provide advice in all consumer and business loans including equipment finance. All loans are subject to lending and approval criteria.
Phillip Dibben is also a financial adviser at Active Financial Management. Active Financial Management and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306.
This information does not consider your personal circumstances (including taxation) and is of a general nature only. You should not act on the information provided without first obtaining advice specific to your circumstances.