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Look At The Data: Family Farms Have A Problem

18 November 2016

Australia’s family farm owners are five times more likely than the average person to still be working over the age of 65, and that could be a problem. Too many family farms are ignoring succession planning and appear unprepared to pass on their business to the next generation.

Without a stronger, more robust, and more human approach to succession planning, we could witness a crisis in the stability of family farms over the next few decades.

So, how big is the problem facing Australian family farms? Consider the following:

  • 99 per cent of Australian farm businesses are family owned and operated, per the National Farmers’ Federation

  • The average working farmer is 52 years of age, 12 years older than the national average for all other workers

  • Up to 42 per cent of existing leaders of Australian family farms have not discussed succession with their spouse, and up to 63 per cent have not discussed succession with their children.

The conclusion you should draw is clear– family farms are getting older yet appear ill-equipped to pass the baton to the next generation. They seem unwilling to start this potentially difficult conversation.

When succession does take place, it is often sloppy, haphazard or sometimes stuck on old stereotypes based on gender; poor succession planning often harms the farming business itself. The Grains Research & Development Corporation reports that “modern estate planning is leading to smaller farms, or farms with heavy debt burdens.”

Succession Planning with Education and Compassion

Juggling what is equal versus what is fair when thinking about future plans can be a huge obstacle for rural families. In a family business setting, however, equal family treatment can lead to unrealistic expectations among children about income, ownership, distributions, and other perks from the business.

A brilliant article by the Grains Research and Development Corp prompts some excellent starting points for Australian rural families and we could not agree more. In a nutshell:

  • Succession is a journey, there is unlikely to be a distinct line in the sand.

  • Be educated. Don’t rush in blindly, get everyone involved to do some reading or other learning in preparation.

  • Have flexibility, incorporate some what-ifs, some of which will inevitably occur.

  • In addition and probably a surprise to most people, separate the succession process from estate planning.

However the most important item that all family business anecdotes and research agree upon is that it is the people that matter most.Try to discuss wants and needs with guidelines and a framework. Let everyone have a voice. If you need to, get an independent facilitator to help.

Family is first. You could build a business anytime you want, but to repair the

damage of the family takes a lot of time

Rafael Tejeda, CEO and 2nd Gen GrupoEmpressarial. Global family business based in Mexico

The best and most compassionate approach is start planning as early as possible to ensure future disagreements do not derail a business that may have been in existence for generations. It is critical that family businesses, especially farming families who seem to want to avoidthis, begin talking, educating and preparing all parties for succession planning while well thought-out and fair plans can be made, not after.

Insights  is a not-for-profit that provides tools to improve family business communication, harmony and sustainability.