I don't have a succession plan for my farm but my brother has one with his kids that seems to be working. When we were discussing the growth in land prices the other day, he questioned the impact of not having a succession plan. What are your thoughts?
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The succession topic is parked by some and avoided by others, and this can happen for several reasons including: uncertainty of what is possible or what is fair, fear on what the plan means for each generation, concern about family conflict, cost and tax consequences regarding options and the time commitment involved to develop options and solutions.
But if you take away the word succession, business owners face these problems every day in their business operations. And, more often than not, they are able to address and deal with them in a timely manner. And that's because, when you break it down, succession strategies are just another business decision, albeit probably one of the most important business decisions you will make.
Choosing to defer or not develop a succession plan will most likely limit the options available to you which can often come at a cost, both financial and emotional. The live example of this we are dealing with is the rapid increase in land prices over the past 12-18 months.
Choosing to defer or not develop a succession plan will most likely limit the options available to you which can often come at a cost, both financial and emotional.
Whilst land may continue to grow in value, in most cases, there is a cap out point on viability based on the scale and substance of the operations that will generate revenue/profit from the same land. Although these are the facts, how each family manages this will be unique to the individual circumstances.
This land example emphasises the old adage that fair does not always mean equal. However, as assets continue to grow in value, the gap between fair and equal can become greater. Accordingly, the quantum of the value gap may start to become a problem with succession strategies.
Working collectively with your family and accounting, legal and financial advisers will enable you to assess options in advance and help give you visibility on the impact of deferring certain decisions (if applicable).
The simple fact is committing to developing and executing a succession plan helps you to avoid the stress of not having a plan, while also limiting the potential compounding challenges that build every year you choose to ignore the issue.
Often, we rely on time to address matters later but for some "later" can come sooner than expected. If you would like more information on this topic or have a question, please email me at albury@findex.com.au
The views and opinions expressed in this article are those of the author/s and do not necessarily reflect the thought or position of Findex (Aust) Pty Ltd.
