COVID-19 and a post-Brexit world — catalysts for business model re-evaluation
Arguably, there has never been a more appropriate time for those in farming businesses to have frank discussions about what’s next.
There’s plenty of food for thought for farmers and growers over the next few months.
For a start, there’s a likely downward trend in farm income support post-Brexit as well as concern over what happens with future trade deals. Plus, COVID-19 has been a salutary reminder of our own mortality.
Succession planning in business shouldn’t just focus on what happens when someone dies or retires. It’s about putting your business on the best possible footing for the future.
That’s often easier said than done.
We all know sometimes it’s just easier to put conversations off because they’re just too difficult.
That, in our experience, has often been the case with business change and succession planning.
After all, farming, in most cases, is a family business and any change can be very difficult to address. People often don’t want to ‘upset the apple cart’.
That said, open communication is instrumental for success, even survival.
This includes consultation with trusted advisors, business partners and extended family to look at what comes next.
The demand for rural property could well far outstrip the supply and it may be that, for some, the time is right to take the hard decision to sell or to re-distribute assets to allow family members to move on with their own lives.
The importance of having a plan
From significant financial claims that threaten the very existence of the business, to an irretrievable breakdown in even the closest of relationships, the consequences of lack of effective succession planning can prove devastating.
These are valuable businesses.
As such, when a family member wants to leave or retire and withdraw funds from the business, or when someone sadly passes away, the potential temptation for family members to ensure they receive their perceived — or assumed — share of that worth all-too-often means we see disagreements crop up.
Even very close family relationships deteriorate, especially where there are no formal agreements in place.
If big decisions are to be made involving the disposal, acquisition or borrowing against the value of assets, then it’s best to have the framework for doing this agreed and documented in advance.
That includes whether majority or unanimous decisions can be made on certain issues.
A good start
Those in business should consider the end point they’d like to reach, from the optimistic position of where they’re starting from.
Like marriage, disagreements between parties rarely occur at the set-up of a business, but all-too-often, if provisions are not put in place for clear decision-making, disputes can occur during the running of the business or indeed on its demise. Intractable positions develop.
Even if you have properly drafted and up-to-date documentation regulating your business practice to ensure no unexpected surprises, you must take great care with succession planning when someone dies. Customising a will is often not enough.
The complex Scottish legal system means it’s crucial people’s intentions are accurately documented at the time of drafting and backed up by the appropriate ownership structure of the underlying assets.
In the uncertain post-COVID, post-Brexit world, the strongest and fittest will thrive. Putting the framework of the business together in a robust manner will optimise the chance of success.
Getting this right and having these difficult conversations early on doesn’t just allow senior members to step back with confidence, it allows the younger generation to step up when the time’s right.
A more profitable, protected and resilient farm business that’s significantly less likely to be the subject of often costly, sometimes devastating, legal claims.