Wednesday, 15 February 2012

Succession & Inheritance for Farming Businesses - Siblings in Business Together

Many parents would like to see their children working in the family business together. It ensures the business remains in the family and it means that they do not have to split the farm business. It seems such a good idea at the time. The young people get on well together and are happy and enthusiastic. However in my experience you have to be very cautious with this arrangement.
As time goes on the young people get married and have families. They don't spend so much social time together and their priorities change. At this stage they still may be able to work together because the previous generation are still making the final decisions. However it gets more and more difficult if they have different views on the development of the business.
When they finally take over the running of the business the dynamics change and now they have to make decisions by themselves. If they disagree who makes the final decision? This can lead to resentment and dissatisfaction.
If the business is large enough it may be possible to accommodate siblings who can be in charge of their own area. However they still have to agree on certain decisions such as the allocation of capital or the mix of enterprises. Either one of them has to be seen as the final decision maker or they may have to use an independent arbitrator when they disagree.
In smaller businesses this is often not practical. The danger then arises that the siblings will increasingly find it difficult to work together. Unfortunately this may result in family splits. It is very sad to see siblings unable to speak to each other and blaming their sibling for thwarting their dreams and ambitions.
It may be far better to set the siblings up in separate businesses from the outset. Extra land may have to be purchased or rented and although this may place a strain on the business at the time, it could be a far more sustainable arrangement in the long term.
Parents often work very hard to pass on a debt free business to the next generation but I agree with a banker I met recently who advised parents to leave their children with some debt. "Otherwise why would they get out of bed in the morning?!"

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