Can the cashflow from my family farm fund multiple generations?
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The answer to this question will vary between families and fortunately for some, the concern around available cashflow is not an issue.
However, others may find it a real challenge, so much so, that the topic is a taboo.
This, in turn, has the potential to create problems and divisions between family members. A wide variety of factors can influence the topic of cashflow, some of the more common being: the future strategy of the business, operational results of the business, individual lifestyle expectations, education expectations, and the age of reliant family members on it.
It is a common issue when dealing with multiple generations in the one business, so being clear on what is possible and developing a family plan to address the issue is a good starting point.
Acknowledging the topic as a business issue to be addressed will allow you to understand the options that are available, what challenges exist with the options and most importantly provide you with time to develop solutions.
To generate the optimum business results there is a focus and a strategy. The same rules apply to this matter, so it's important to dedicate the necessary time to focus on potential solutions. The drawback is that working through this process may deliver a limited range of options to some families and encompass feedback that may be difficult to hear, however, this is one of the attributes of being in business.
There are a range of strategies that you can develop with your advisers to maximise the potential of this working effectively.
One of the most effective is formulating a plan to build wealth outside of the business so when the time comes, the question of "can the farm afford this" becomes irrelevant as you have built wealth outside of the business.
It is also important to note that debt may form part of the strategy to achieve the needs of multiple generations.
Whilst some may feel that this issue is only relevant to older generations, the earlier you start planning your strategy, the better the position you will be in down the track.
The ability for the farm to fund multiple generations is quite often possible, but how successful this is can be directly related to the time devoted to building the strategy to achieve it.
If you would like more information or have a question, please email me at albury@findex.com.au.
While all reasonable care is taken in the preparation of this article, to the extent allowed by legislation Findex (Aust) Pty Ltd ABN 84 006 466 351 (Findex) accept no liability whatsoever for reliance on it. All opinions, conclusions, forecasts or recommendations are reasonably held at the time of compilation but are subject to change without notice.
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