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?!"
Wednesday, 15 February 2012
Monday, 29 March 2010
Farmers never retire!
Very few farmers or any family business owners for that matter, ever truly retire. If they have built up a business and spent their working lives in that business it becomes part of them. They feel they are the business so how could they possible retire? This has been a major problem for family businesses in the past but will become even more so as people are expected to live fit and healthy lives well into their eighties. This is not good news for the next generation who want their own chance to build upon and grow the family business.
In an ideal world once business owners reach the age of about 50/55 they should be planning the future for themselves rather than the younger generation having to put pressure on them at a later stage. In many families retirement has become a taboo subject which sadly puts pressure on previously very happy family relationships.
However it is possible to facilitate a process where the older generation move aside for the younger but it has to be handled carefully and tactfully. I think the first thing is to recognise that the older generation will always be attached to the business. It has been their life's work and they have built their self respect around their position in the business. Therefore any talk of retirement or change in status has to be dealt with sympathetically and with understanding. Farmers are not people who happen to earn a living farming. It is who they are - they are farmers.
So if the older generation are not going to retire in the accepted sense it is important that the change in their role and responsibilities is discussed and clarified. Just letting it drift along seems to cause more anguish and upset within the family as members become unsure of who is making the decisions. Also the younger generation feel that they are in a precarious situation and are torn between wanting to take over the family business and providing a secure future for their own family.
The passing on of responsibilities can be planned in an orderly manner over an agreed timeframe. However this has to be written down and agreed by everyone including the professionals who deal with the business ie bank, accountant, solicitor. This should help when the time comes to hand over overall responsibility for the business, making sure it is not postponed by a reluctant older generation.
It is very important that the older generation are moving into a new role whether within the business or with a new or related business. This is giving them a new challenge and interest in life rather than signalling that they are at the end of their productive life. So the question should not be when are you going to retire but what are you going to retire to?Some farmers assume responsibility for an enterprise within the main business, for instance young stock or machinery maintenance. Some farmers start a new enterprise of their own - a small beef herd, pedigree flock or breed horses. Some farmers start entirely new businesses away from the farm buying the local garage or shop, running a B&B or tourist enterprise.Convincing farmers that they have the skills to run another business can sometimes be difficult because few realise that farming is a hugely complicated business needing a wide range of skills, many more than 'ordinary' businesses. Many farmers I know who have gone on to run other businesses are surprised how easily their skills are transferred and how much simpler it is.
As in all dealings within a family business it is essential to have good communication between all parties so that all expectations are clarified. Also to make these plans in good time before relationships are put under strain. It is always great to hear Dad and Mum after a while in their new role saying "we should have done this years ago"!
Thursday, 25 March 2010
Farmers never retire!
Very few farmers or any family business owners for that matter, ever truly retire. If they have built up a business and spent their working lives in that business it becomes part of them. They feel they are the business so how could they possible retire? This has been a major problem for family businesses in the past but will become even more so as people are expected to live fit and healthy lives well into their eighties. This is not good news for the next generation who want their own chance to build upon and grow the family business.
In an ideal world once business owners reach the age of about 50/55 they should be planning the future for themselves rather then the younger generation having to put pressure on them at a later stage. In many families retirement has become a taboo subject which sadly puts pressure on previously very happy family relationships.
However it is possible to facilitate a process where the older generation move aside for the younger but it has to be handled carefully and tactfully. I think the first thing is to recognise that the older generation will always be attached to the business. It has been their life's work and they have built their self respect around their position in the business. Therefore any talk of retirement or change in status has to be dealt with sympathetically and with understanding. Farmers are not people who happen to earn a living farming. It is who they are - they are farmers.
So if the older generation are not going to retire in the accepted sense it is important that the change in their role and responsibilities is discussed and clarified. Just letting it drift along seems to cause more anguish and upset within the family as members become unsure of who is making the decisions. Also the younger generation feel that they are in a precarious situation and are torn between wanting to take over the family business and providing a secure future for their own family.
The passing on of responsibilities can be planned in an orderly manner over an agreed timeframe. However this has to be written down and agreed by everyone including the professionals who deal with the business ie bank, accountant, solicitor. This should help when the time comes to hand over overall responsibility for the business, making sure it is not postponed by a reluctant older generation.
It is very important that the older generation are moving into a new role whether within the business or with a new or related business. This is giving them a new challenge and interest in life rather than signalling that they are at the end of their productive life. So the question should not be when are you going to retire but what are you going to retire to?
Some farmers assume responsibility for an enterprise within the main business, for instance young stock or machinery maintenance. Some farmers start a new enterprise of their own - a small beef herd, pedigree flock or breed horses. Some farmers start entirely new businesses away from the farm buying the local garage or shop, running a B&B or tourist enterprise.
Convincing farmers that they have the skills to run another business can sometimes be difficult because few realise that farming is a hugely complicated business needing a wide range of skills, many more than 'ordinary' businesses. Many farmers I know who have gone on to run other businesses are surprised how easily their skills are transferred and how much simpler it is.
As in all dealings within a family business it is essential to have good communication between all parties so that all expectations are clarified. Also to make these plans in good time before relationships are put under strain. It is always great to hear Dad and Mum after a while in their new role saying "we should have done this years ago"!
In an ideal world once business owners reach the age of about 50/55 they should be planning the future for themselves rather then the younger generation having to put pressure on them at a later stage. In many families retirement has become a taboo subject which sadly puts pressure on previously very happy family relationships.
However it is possible to facilitate a process where the older generation move aside for the younger but it has to be handled carefully and tactfully. I think the first thing is to recognise that the older generation will always be attached to the business. It has been their life's work and they have built their self respect around their position in the business. Therefore any talk of retirement or change in status has to be dealt with sympathetically and with understanding. Farmers are not people who happen to earn a living farming. It is who they are - they are farmers.
So if the older generation are not going to retire in the accepted sense it is important that the change in their role and responsibilities is discussed and clarified. Just letting it drift along seems to cause more anguish and upset within the family as members become unsure of who is making the decisions. Also the younger generation feel that they are in a precarious situation and are torn between wanting to take over the family business and providing a secure future for their own family.
The passing on of responsibilities can be planned in an orderly manner over an agreed timeframe. However this has to be written down and agreed by everyone including the professionals who deal with the business ie bank, accountant, solicitor. This should help when the time comes to hand over overall responsibility for the business, making sure it is not postponed by a reluctant older generation.
It is very important that the older generation are moving into a new role whether within the business or with a new or related business. This is giving them a new challenge and interest in life rather than signalling that they are at the end of their productive life. So the question should not be when are you going to retire but what are you going to retire to?
Some farmers assume responsibility for an enterprise within the main business, for instance young stock or machinery maintenance. Some farmers start a new enterprise of their own - a small beef herd, pedigree flock or breed horses. Some farmers start entirely new businesses away from the farm buying the local garage or shop, running a B&B or tourist enterprise.
Convincing farmers that they have the skills to run another business can sometimes be difficult because few realise that farming is a hugely complicated business needing a wide range of skills, many more than 'ordinary' businesses. Many farmers I know who have gone on to run other businesses are surprised how easily their skills are transferred and how much simpler it is.
As in all dealings within a family business it is essential to have good communication between all parties so that all expectations are clarified. Also to make these plans in good time before relationships are put under strain. It is always great to hear Dad and Mum after a while in their new role saying "we should have done this years ago"!
Monday, 16 November 2009
Wills are challenged
Many solicitors tell me that one of the areas of their business that is growing fast is the contesting of Wills. Many people assume that once they have made a Will that is the end of the story but increasingly it is not. Looking into this area I have been surprised by how many people are contesting Wills.
All this underlines how important it is to discuss your Will with the family so that all the possible contentious issues are sorted out. If families contest Wills against each other that is usually the end of all reasonable family relationships. We all want to leave a legacy but none of us want that legacy to be a split and unhappy family. None of us would like to think that our children will be quarrelling irreconcilably because of our actions or lack of forethought. We would all like our children to remember us fondly not as the cause of pain and stress.
Writing a Will that has been discussed and agreed with family members lifts a huge weight and worry off people's shoulders and it is not as difficult or as costly as people imagine. It is one of those things that we put off, some times until it's too late. So take action today. Get that Will sorted and ensure that you leave behind a happy family.
All this underlines how important it is to discuss your Will with the family so that all the possible contentious issues are sorted out. If families contest Wills against each other that is usually the end of all reasonable family relationships. We all want to leave a legacy but none of us want that legacy to be a split and unhappy family. None of us would like to think that our children will be quarrelling irreconcilably because of our actions or lack of forethought. We would all like our children to remember us fondly not as the cause of pain and stress.
Writing a Will that has been discussed and agreed with family members lifts a huge weight and worry off people's shoulders and it is not as difficult or as costly as people imagine. It is one of those things that we put off, some times until it's too late. So take action today. Get that Will sorted and ensure that you leave behind a happy family.
Friday, 4 September 2009
Accountants
Accountants
It always surprises me when a client says when I recommend that their accountant be present at a family meeting, that their accountant ‘isn’t much good’. When running a business, especially one as complex as a farm business, a good accountant can be a valuable asset.
I don’t believe that there are a lot of bad accountants out there – although there are some! – I think that maybe we don’t communicate with them as effectively as we could. That communication should start with ourselves and having clarity about what we want from our accountant.
If we just want someone to sort out our accounts at the end of the year that’s quite straightforward. However is we want someone to save us from paying too much tax and give us tax advice throughout the year then that is something we should ask for.
When talking about succession and avoiding paying Inheritance Tax and Capital Gains Tax this is a specialist area. Some accountants are very good and others are not. Therefore don’t be afraid to ask for advice elsewhere. I know of one tax expert that works with other accountants and signs a declaration promising not to ‘poach’ the client. Also don’t forget that if you are a member of the NFU, CLA (not sure about the FUW- apologies) they have a free tax advice service.
In the end you get the accountant you deserve. After all you give the information to the accountant and you can shop around if you’re not satisfied with the service you are getting.
It always surprises me when a client says when I recommend that their accountant be present at a family meeting, that their accountant ‘isn’t much good’. When running a business, especially one as complex as a farm business, a good accountant can be a valuable asset.
I don’t believe that there are a lot of bad accountants out there – although there are some! – I think that maybe we don’t communicate with them as effectively as we could. That communication should start with ourselves and having clarity about what we want from our accountant.
If we just want someone to sort out our accounts at the end of the year that’s quite straightforward. However is we want someone to save us from paying too much tax and give us tax advice throughout the year then that is something we should ask for.
When talking about succession and avoiding paying Inheritance Tax and Capital Gains Tax this is a specialist area. Some accountants are very good and others are not. Therefore don’t be afraid to ask for advice elsewhere. I know of one tax expert that works with other accountants and signs a declaration promising not to ‘poach’ the client. Also don’t forget that if you are a member of the NFU, CLA (not sure about the FUW- apologies) they have a free tax advice service.
In the end you get the accountant you deserve. After all you give the information to the accountant and you can shop around if you’re not satisfied with the service you are getting.
Are you an eagle in disguise?
I love this story!
One day a man was passing a farmyard and he stopped to ask the farmer why an eagle, was living with the chickens.
The farmer told him that it behaved like a chicken, it had never learned to fly so it thought it was a chicken. The man replied that surely the eagle still had the soul of an eagle and could be taught to fly.
After a bit of discussion the farmer agreed to see if the eagle could fly. The man picked up the bird and said to the bird “stretch out your wings and fly” but the eagle saw the chickens pecking around on the ground and hopped back down to join them.
The next day the man took the eagle onto the roof of a farm shed and held it up saying, “ stretch out your wings and fly” but the eagle was afraid and hopped back down to the chickens.
The next day the man took the eagle up to the top of a nearby mountain and held the eagle up saying “you are an eagle you should be soaring through the skies”. The eagle looked back down the mountain to the farmyard below but still he would not fly. Then the sun came out from behind the clouds and shone on the eagle’s back. He looked up into the sky and started to tremble then he stretched out his wings and soared into the air. He flew around majestically and then disappeared from sight.
The eagle may have missed his life as a chicken but he never went back to the farmyard because he was an eagle not a chicken.
So are you an eagle pretending to be a chicken? What’s holding you back from becoming all that you can be?
One day a man was passing a farmyard and he stopped to ask the farmer why an eagle, was living with the chickens.
The farmer told him that it behaved like a chicken, it had never learned to fly so it thought it was a chicken. The man replied that surely the eagle still had the soul of an eagle and could be taught to fly.
After a bit of discussion the farmer agreed to see if the eagle could fly. The man picked up the bird and said to the bird “stretch out your wings and fly” but the eagle saw the chickens pecking around on the ground and hopped back down to join them.
The next day the man took the eagle onto the roof of a farm shed and held it up saying, “ stretch out your wings and fly” but the eagle was afraid and hopped back down to the chickens.
The next day the man took the eagle up to the top of a nearby mountain and held the eagle up saying “you are an eagle you should be soaring through the skies”. The eagle looked back down the mountain to the farmyard below but still he would not fly. Then the sun came out from behind the clouds and shone on the eagle’s back. He looked up into the sky and started to tremble then he stretched out his wings and soared into the air. He flew around majestically and then disappeared from sight.
The eagle may have missed his life as a chicken but he never went back to the farmyard because he was an eagle not a chicken.
So are you an eagle pretending to be a chicken? What’s holding you back from becoming all that you can be?
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