Farm Business Succession Planning

 

What is Succession Planning?

Succession planning, whether it involves a farm business or any other type of agri-business, is a process and not an event. Succession planning involves several steps, with special considerations at each step before the plan is complete. This article gives a general description of the process and some things to consider as you start succession planning.

 

Succession

Succession planning is the process by which the knowledge, skills, labour, management and control of ownership of an existing agribusiness is transferred from the founder or owner to the next generation of ownership.  The “next generation” may or may not be a family member.  Most often this transfer happens in steps:

  • Transfer of knowledge, skills and labour

  • Your succession plan should include the details of how your knowledge and skills will be shared and obtained by the next generation of your farm business. Often, the next generation will be working in the farm business and participating in the day-to-day operations.  Acquiring knowledge and skills happens over time and may occur through a direct hands-on approach or through more formal education and learning opportunities. 

  • Transfer of management

    • Gradually, as the next generation is included in management decisions (production, human resources and financial decisions), you will begin making fewer management decisions.  A good succession plan includes how this will happen, who will be responsible for each aspect of decision making and a timeline for the transfer of all areas of decision making.

  • Control of ownership

    • This is the last aspect of the farm or business to be transferred. Control of ownership involves the transfer of all, or a portion of, the business assets and decisions regarding the assets. Because of the complex nature of farm business transactions, including financial and taxation, legalities and implications for family members, the final step is often the most difficult for the farm business owner.

 

The Succession Plan

Succession planning should begin sooner rather than later and should be considered part of your annual business plan update. 

 

Succession planning involves the following[1]:

  • Preliminary Steps

  • Open the lines of communication.

  • Define goals and objectives.

  • Identify a successor.

  • Assess compatibility.

  • Step 1.  Collect and analyze information.

  • Step 2.  Generate options.

  • Step 3.  Make preliminary decisions.

  • Step 4.  Design, develop, write and review.

  • Step 5.  Implement and monitor.

 

The development of your plan involves you, your family, other stakeholders and a team of professionals, such as lawyers and accountants who will help you make legal and financial decisions. The written plan should contain the following sections:

  • Cover and Summary pages and a Table of Contents

  • Executive Summary

  • Description of the farm or agri- business

  • Description of business and personal goals and expectations

  • Retirement plan for founder

  • Training and development plan for successor(s)

  • Farm business plan

  • Operating plan

  • Labour, management and control transfer plan

  • Ownership transfer plan

  • Implementation timetable

  • Communications plan

  • Contingency plan

 

Summary

Succession planning is a process that occurs over time, involving several steps and a team of people to ensure you make the best plan for you, your successors and the farm or agri-business you have built.

 

Other Resources

Canadian Farm Business Management Council. 2006. Managing the Multi-generational Family Farm.

Ontario Ministry of Agriculture and Food. Farm Succession Planning Guide. Publication 70.

 

 

This information / resource has been provided courtesy of the Department of Natural Resources' Agrifoods Development Branch.

 

The Agrifoods Development Branch has resources to assist with management of a farm. We offer short courses, consultation, publications and financial assistance to eligible applicants. For more information, please contact the Farm Management Specialist in your area:

 

Eastern: Paul Collins, 709-729-6749, paulcollins@gov.nl.ca

Central/Western/Labrador: Erica Cole, 709-256-1042, Erica.Cole@gov.nl.ca

 

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Footnote:

 

 

 

[1] Farm succession planning steps and checklist. Peter H. Coughler, Ontario Ministry of Agriculture and Food, Order No. 10-025.

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