Spending a fortune on succession planning?
Are you spending a fortune on succession planning? Are you lining up to spend tens of thousands of dollars on Succession Planning consultants and perhaps setting up a structure that is so complex that nobody will ever be able to disentangle it except the consultant who set it up for you?
What is required
Succession planning is very important for those running family farms and businesses, but it is not very complex and it is not very difficult. It is not hard to enable current owners to come up with who they want to own the operation when they don’t want to. Sorting out a fair solution for other family members is not difficult once the first decision has been made. Then the timing and trade-offs can be put in place.
Simple jig-saw
Succession planning is like a fairly simple jig-saw puzzle. The key is making sure that control rests where the owners want it for as long as they want it and how that is achieved. Like moving livestock, it works best if you take it a bit quietly and make sure that everybody stays happy as the process moves along.
People before profit
Whilst all consultants hope to make a profit out of advising their clients, in order to earn a crust for their own families, succession planning is about people more than money. It is about tradition and heritage. It often gives us a piece of the family history that is more precious than the land or the profit it generates. Younger generations are not always as tuned in to that as the older ones so both must be accommodated. Decades ago I lobbied parliaments successfully by Votergram to get more favourable tax and duty treatment of inter-generational transfers.
Experience
What is vital is that the consultants actually know from experience what it is like to hand on or take on family farms or businesses. I bought the farm my great-grandfather had settled in 1865 and I took over the business my grandfather had started in 1937. Succession planning should not be seen as a “good source of fees”, but as a chance to give professional assistance to a family in order to facilitate succession in a way that avoids causing dispute or disappointment within the family.
It needs time, not money
For that reason the earlier it is thought about the better, without necessarily putting anything in place too early, because family situations and goals can change over time. Early planning allows flexible options to be developed so that changing circumstances can be easily managed.
In one winery business that we consulted, the winning factor was time for everyone to go away and mull the proposal over, then come back and adopt it a year and a half later, with everyone happy with the outcome.
It’s a molehill not a mountain
Some advisers, consultants and counsellors are making a mountain out of this small molehill and a motza of money in the process. What the consultant needs to know about the farm or business is:
What it is, where it is and roughly what it is worth.
Who owns it now and who might own it after them.
What others might be contenders for succession.
What average annual net profit was for the previous five years.
Retirement plans of current owners, no matter what age they are now.
Don’t waste hard-to-earn money on complex solutions when simple ones are better. If you want to know more give GBAC Advisory a call on 0428 417 496 or email greg@gbac.au Happy to just chat about it.