August 11, 2015
Succession planning is often a difficult journey for farming families in Australia and New Zealand – the very idea of ‘sharing the helm’ or let alone seeing a change in captain can be a challenging concept for farmers to face, according to Rabobank.
In its latest report, ‘Farm Succession Planning: Navigating the seas of change’,
the specialist agricultural lender Rabobank delves into the complex nature of family farm business succession, highlighting the importance of starting the process early to adequately map out a strategy and approach to manage expectations of all parties involved.
Rabobank commodity analyst and report co-author Emma Higgins says that honest conversations regarding profitability, expectations and visions for both the family and business pose as challenges when it comes to approaching succession.
“For existing farmers, the idea of initiating these discussions and handing over the helm can sometimes be overwhelming and complex – many are leaving it too late which can cause more significant issues to arise later on,” Ms Higgins said.
“Simply delaying succession conversations and ‘hoping for the best’ is an incredibly risky strategy for the business and family unit. Delay in itself becomes a problem in that the more time passes, the more succession options become restricted, further exacerbating stresses and difficulties in the family.”
The Rabobank report highlights that building and maintaining a viable business and understanding the financial reality of the family farm is critical.
Rabobank’s succession manager Kim Lee says a robust balance sheet and adequate cash flow are required to ensure career, work opportunities and retirement goals can coexist and meet the needs of all financially reliant on the business, before any new family members are offered the opportunity to work in the business.
“Conversations around profitability can be off-putting and further complicated by the strong emotional ties that accompany the intense financial scrutiny that a generation’s efforts are subjected to,” she says.
Keeping the next generation interested in agriculture
Ms Lee says that opportunities created from planned business strategy allow pathways for the next generation in agriculture – such as share farming, leasing arrangements, family loans or equity partnerships – and they create the building blocks of equity and experience for the next generation.
“Having ‘skin in the game’ demonstrates commitment and generates additional motivation for new farmers, along with creating new options to expand the business,” she says.
“In addition, a win-win situation can arise for both parties – creating a role for the next generation in the family business can bring about a sense of achievement. A sense of value for the current generation is retained, and it provides the legacy of the family farm to the next generation.”
Ms Lee is one of Rabobank’s succession planning facilitators and has extensive experience in working with rural farming families to achieve personal, family and financial benefits for each generation.
Rabobank Australia & New Zealand is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 115 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 41 countries, servicing the needs of approximately 10 million clients worldwide through a network of more than 1600 offices and branches. Rabobank Australia & New Zealand is one of Australasia's leading rural lenders and a significant provider of business and corporate banking and financial services to the region's food and agribusiness sector. The bank has 94 branches throughout Australia and New Zealand.
Rabobank Australia & New Zealand
Phone: 02 8115 2744 or 0439 603 525
Rabobank Australia & New Zealand
Phone: 07 3115 1832 or 0418 216 103