Succession is a word loaded with different meanings to different people with perhaps the most popular of these interpretations meaning the transfer of the family assets to one or more heirs. Most strategies designed to achieve this result are based ona combination of tax minimisation and the division of the assets in either equal portions or on the basis of primogeniture – the eldest son takes all. The question of fairness is seldom raised nor is any attention paid to the dreams, desires and expectations of the people involved until it is too late. More emphasis is paid to the value of the asset(s) than the overall viability of the business.
An alternative view is to look at succession as continuance of the family farm business – with or without family members at the helm. This interpretation assumes that the business is in a position to be continued beyond the current generation and that this is the deliberate intention of the current owners. This model takes the humanistic view that the current and future needs and wants of the people involved are identified and a plan put in place to achieve before any ‘technical’ legal and accounting advice and structures are considered. Communication and conflict resolution skills are essential to ensuring that everyone can also fully operate and participate as business partners inaddition to being members of the family and that time is set aside for business meetings to ensure family time is just that.
Inherent in the business continuance model is that the founders are committed to passing the farm on to another generation, whether in the family or not. Unless the founders will make this commitment the farm could be considered a personal old folks home with no staff – a place to die with your boots on!
In cases where the successor cannot be found within the family, the same process is applied to ensure that succession of the business is successful, whether it remains in possession of the family or not.
The Business Continuance model also requires a fair process for determining the in-family heir (as opposed to an equal share amongst siblings) or non-family successor, which includes an allowance for ‘sweat for equity’ and/or the time-value of money. An analysis of the skills and knowledge required to operate and grow the business is required to be matched up with the relevant current skills and ability of potential successors. Where possible and appropriate a training plan is developed and phased in – and where it is a poor match a decision made to look for an alternative solution; a supporting team, external successor and/or sale. No-one wants to set their family up for failure by supporting them into a venture that is not, cannot and will not be successful either due to their management capabilities (including business and financial acumen) or the scale and scope of the business.
Other considerations will that require working through are the strategic business plan to determine where the business is now, where it wants to be and how it will get there;retirement and estate plan to ensure that the founders can live the life they deserve when they reinvent themselves post-farm; wills - current and accurately reflect desires and discussed with family; remuneration of both family and non-family members of the business is equitable with the position, experience and difficulty of replacement.
To put the Success back in Succession© a professional facilitator who specializes in succession and business planning is recommended to ensure that the families key values and issues (the critical questions) are asked and answered; processes for management (practical, business and financial) are put in place and that effective communication, conflict resolution, business meeting and negotiation skills are developed and/or enhanced.
Mandi McLeod
Silvanus Consulting Ltd
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