Passing farms onto the younger generation was still one of the main succession plans though it was becoming less common and making it fair to non-farming children could be tricky. PHOTO/GIANINA SCHWANECKE
For some farmers, the thought of having to divvy up their life’s work or planning to sell on to strangers can be a daunting, blocking them from planning properly for their futures.
But succession planning doesn’t have to be an intimidating process says John Murray from PGG Wrightson.
“It’s very personal. It’s a real deep thing for [farmers] to get their heads around,” he said.
“It’s sometimes put on the back burner because it’s too hard.”
There was a lot of pressure for them to figure out what to do with the farm and how to look after their families, he said.
“Once a plan is in place, it takes the weight off their shoulders.”
Earlier this year, he ran a seminar about farm succession planning, hoping to get people thinking about their options.
“It’s never too early to start. Farmers might think they are miles away from handing the farm over.”
Murray said farmers needed time to get things in order and make sure the farm is in good condition.
“You want to be able to present your farm as a Monday morning farm, so a new owner can see there is nothing to do but untie the dogs on a Monday morning and start farming.”
There were a number of options available to farmers, he said.
Selling or leasing the farm were common options, though preparing the property for a quick sale or maintaining its quality over a lease could be difficult.
Equity partnerships had become more widely used in the last 15 years.
“It gives farm owners the opportunity to bring young people into the farm with energy and enthusiasm.”
This was a good thing, he said, as the average age of farmers continued to rise, and young people were finding it more difficult to enter the industry let alone buy a farm of their own.
“It comes with its challenges like any partnership.”
Passing farms onto the younger generation was still one of the main succession plans though it was becoming less common and making it fair to non-farming children could be tricky.
Having an exit strategy in any event was important, and that’s what succession planning involved, he said.
“It might be a big, personal thing.
“It’s just a matter of going through steps and working with the right people.”
Geordie McCallum, from Wairarapa Property Consultants [WPC], spoke at the seminar and agreed that farm succession planning was a very personal thing.
It could also be quite complicated.
“It brings a number of processes into one,” he said.
“You have transition of labour on the farm as the retiring generation step themselves out of operating as the next generation learn the skills and work their way up.
“You’ve got retirement which is a challenging process for people making the move from working life.”
It was a careful balancing act between often contrary needs, he said.
“When you’re dealing with farms, you’re dealing with a big chunk of capital which comes with a big set of expectations.
“The farm has still got to be viable while making provision for the retiring couple. You’ve also got to make sure there’s something in it for all the other members of the family who aren’t farming.”
Deciding how to do this came with no simple or easy answers, he said.
It required everyone involved sitting around the table and understanding not just what the plan is, but why and how we’ve got to that place.
“A good farm business transition and succession plan transfers the management and sometimes the ownership of a business from one generation to the next, while maintaining family relationships and enhancing business performance.”
McCallum said to start with trusted advisors, like farmers’ regular farm consultants, accountants or bankers.
Succession planning was also important for younger generations of farmers, as pathways to farm ownership are difficult, he said.
“There are opportunities and some that are better today than in the past. It has always been a challenge to get into farming and stay in farming.
“Once upon a time with sheep and beef, you might have shorn your way or leased your way into a farm. There are not as many lease opportunities.
“The amount of capital required to buy a farm are also much more than the average person can earn.”
Equity partnerships provided a steppingstone which bridged these needs, he said.
“There was a need for people to find their way into ownership and on the other side there was a need for people to manage their farms without direct involvement.”
The seminar also focused on wellbeing as farms and their owners transitioned.
It was important for farmers to find interest outside of the farm and look at their own wellbeing, Murray said.
Sarah Donaldson from the East Coast Rural Support Trust said open communication was also important.
“Keep communication going clear and strong right through the process.”
She said it was good to pace the process and break it down into stages, so everyone had a clear idea of what was happening.
Matt Hood, senior rural manager at Rabobank Masterton, said succession planning required long-term thinking.
Having a plan for the end game was important too, he said.
“When the parents retire from active farming, they need somewhere to live, something to live on, and something to live for.”