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Change is inevitable - in life and in business. Understanding your succession options and having a plan in place is good business practice, but it can also be a critical consideration when it comes to personal relationships with family members.
Every business and family situation is unique and requires tailored succession solutions.
Wagga Wagga-based Andrew Bowcher, Partner RSM Restructuring and Recovery, has been seeing an increase in the number of enquiries related to family succession planning, particularly in the Agribusiness sector.
Why is succession planning so important?
Succession planning really is about having your ‘ducks in a row’ when it comes to your business strategy for your small business or farming enterprise. Regardless of your turnover, asset value, or the people involved - it’s advisable to have a clear and considered succession plan in place.
It’s critical to proactively ask yourself questions, including:
- Will the business continue after I retire, or if unexpected circumstances unfold, such as ill health?
- If the business is to continue to operate, who will play leadership roles?
- How will people be compensated or remunerated?
- What safeguards can I put in place to ensure the business can continue to operate without interruption if or when circumstances change?
- If I want to wind up my business, not now, but in the future - what steps should I put in place?
There is often a lot at stake, financially and emotionally. We encourage people to ask the tough questions early, have a succession plan in place and communicate about it proactively with all those who will be impacted.
What if we don’t want to keep the business running? If we think it’s time to call it a day?
There are often plenty of options to consider if you decide to wind up your family business or rural enterprise.
Members Voluntary Liquidation could be an option for your rural business. The choice of method for you and your family is determined by a range of factors including the nature of the assets, the level of pre-Capital Gains Tax (CGT) and post-CGT reserves, the amount of share capital, and the amount of stamp duty payable (depending on the state/territory jurisdiction).
We also know that succession planning is very personal, so along with all the number-based financial considerations, we also listen very closely to the outcome individuals are seeking for themselves and their families.
What are some common scenarios you are seeing in the succession planning space right now, particularly for rural enterprises?
The average age of Australian Farmers is getting older, sitting at 63, so timeframes around succession planning and decision-making are becoming more pressing.
Farming land prices in general have risen, significantly in some cases, so increased asset value can create greater decision-making urgency too. In some cases, there might be off-farm children who don’t want the farm and would rather ‘cash in’, while others may want to continue the family business and way of life.
Post-COVID there has been an increase in people moving to the regions, and hybrid work options are becoming more common. For some, taking over the family farm may now be a more appealing option than it was previously.
We also do also see situations where the succession planning challenges become very heated and personal. It may be that there are two brothers who can't agree to take on the farm because their wives don’t get along. There’s a lot of family disruption and dispute resolution required in these situations.
Why do you think mental health impacts are so significant for SME’s and rural enterprise owners?
It’s hard work running a business and there are so many variables involved. We’ve had a global pandemic, droughts, floods, labour shortages and supply chain challenges. There is an awful lot for business owners to juggle day in, day out - and some things are simply out of their control.
Alarmingly, The National Farmer Wellbeing Report released in early 2023 has found that in recent years, nearly half of Australian farmers (45%) have felt depressed, with almost two thirds (64%) experiencing anxiety.
The overall wellbeing of Australia’s small business owners also lags behind the general population, a recent Xero report revealed. In Australia small businesses make up more than 97% of all businesses - so that’s a lot of people impacted, daily.
Our team at RSM, unfortunately, can’t control the weather or solve all SME day-to-day challenges - but we can encourage business owners, whether they are solvent or experiencing financial distress, to understand their succession planning options and seek out the best advice possible for their individual circumstances.
I do see a sense of relief in clients who feel that their financial succession plans are in order. Instead of hoping that ‘she’ll be right’ they know that they have made informed decisions for themselves and their loved ones.
Need support to get your succession plan in place?
Our team knows that SMEs and family farming operations are often more than just a business - they can also be a way of life or part of a proud family history. We have empathy for our clients but remain unemotive. We provide sound advice based on your individual situation.
Our experienced team can help you understand your options, and make informed and supported succession planning decisions. Contact us for a free, initial call.
