FFF Insight 14 - You Can’t Fix What You Haven’t Measured

You know what your farm is worth. But do you know how succession ready your family is? 

Farming families measure almost everything. Rainfall, yield, weight gain, fertiliser, fuel, machinery costs, finance ratios, interest rates, land values, debt and equity. We measure because numbers give us information. They tell us where we are, whether we're improving and where we might need to make changes. 

Most farming families could probably give you a reasonable estimate of what their farm is worth. They know roughly what they owe the bank. They know what their machinery is worth. And there's a fair chance they can tell you exactly how many millimetres of rain they've had this year. 

But ask another question — how succession ready is your family? 

That's much harder to answer and I think that's a problem. 

After more than 25 years working with farming families, one response I've heard many times when succession comes up is, “We've talked about it.” And that's a positive start. But what does “we've talked about it” actually mean? 

Does Mum know what the plan is? Does Dad? Do the farming children? What about the non-farming children? Has everyone heard the same plan, or are there several different versions of what everyone thinks is going to happen? 

Have Mum and Dad worked out what they need financially for the next stage of their lives? Does the next generation actually want to take over the farming business? Has the family discussed how farming and non-farming children might be treated? Have the tax and stamp duty implications been considered? Is there a Family Farm Succession Deed in place? Are the wills and estate plans consistent with what everyone thinks is going to happen? 

What happens if life doesn't go according to plan?  Suddenly, “we've talked about succession” can mean something very different. 

One of the most common things we hear from farming families is, “We know we need to do something, but we don't know where to start.” 

That's understandable because farm succession isn't one decision. It's a combination of family, financial, business, legal and emotional decisions, often involving millions of dollars of assets and two or more generations with very different needs. 

There's land, debt, business structures, retirement, ownership, management, tax, stamp duty, wills and estate planning. There might be farming children and non-farming children. There are questions about who wants to farm, who gets what, whether the business can support another generation and what Mum and Dad actually want their lives to look like after succession. 

And underneath all of that are family relationships. 

Put everything on the table at once and it's easy to understand why succession can feel overwhelming. So families delay it. We'll do it after harvest. We'll look at it next year. Dad's not ready. We've got plenty of time.  Then another year passes. 

Perhaps the problem isn't that farming families don't understand the importance of succession. Maybe the problem is that we've made the starting point too difficult. 

You don't need to solve your entire succession plan at the first meeting. You don't need to immediately decide who gets every farm. You don't need to have all the tax answers. You don't need to know exactly when Mum and Dad will retire. And you certainly don't need to predict what the family or farming business will look like in 20 years. 

Before trying to work out where you're going, there's a much simpler question. 

Where are we today? 

That's how we approach most other important decisions in farming. Before trying to improve profitability, we understand current performance. Before making a major investment, we look at the numbers. Before buying another farm, we look at debt, equity, cash flow and productive capacity.  We establish the starting position. 

Why should succession be any different? 

You can't fix what you haven't measured. 

That's the thinking behind the Australian Family Farm Transition Benchmark™. We developed the Benchmark to give Australian farming families a simple starting point for succession. It takes around five minutes to complete and, rather than asking a family to immediately solve succession, it helps them understand where they currently stand. 

At the end, you receive your Succession Readiness Score and a clearer picture of the areas that may deserve attention. 

Importantly, this isn't an exam. There is no pass or fail, and a lower score isn't necessarily bad news. In fact, identifying an issue today before it becomes a major problem tomorrow is exactly the point. 

The Benchmark can help turn a vague concern of “We really need to do something about succession” into a much more useful question — “What do we need to work on next?” 

And that's progress.  The objective isn't simply to get a good score. The objective is to create clarity and, ultimately, action. 

Maybe Mum and Dad haven't determined how much income or capital they'll need when they eventually step away from the farming business. That's a starting point. Maybe the next generation has never clearly expressed what they want their future involvement to look like. That's a conversation that needs to happen. Maybe everyone believes there is a succession plan, but when you start asking questions, nobody seems to have quite the same understanding of it. 

Perhaps the ownership structures, wills and estate planning haven't been reviewed for years. Or perhaps the family is actually much further advanced than they realised.  All of that is valuable information. 

Measurement replaces assumptions with information and better information leads to better conversations and better decisions. 

There's another side to this discussion that I don't think we talk about enough. We tend to talk about farm succession as though it's a problem that needs to be solved. But the upside of getting succession right can be enormous. 

Financially, we can potentially be talking about millions of dollars. There may be significant opportunities available through existing tax and stamp duty concessions. Good planning can help preserve assets accumulated over generations, improve the viability of the farming business transitioning to the next generation and provide greater financial security for Mum and Dad. 

But some of the greatest benefits aren't found on the balance sheet. 

Clarity. Confidence. Better communication. Stronger family relationships. Giving Mum and Dad the confidence to enjoy the next stage of their lives. Giving the next generation some certainty about their future and reducing the risk that misunderstandings today become disputes tomorrow. 

When you consider both the financial and non-financial consequences, why would we leave something this important entirely to chance? 

This is where our three principles of Preserve. Protect. Prosper. become so important. 

What has your family spent the past 30, 40 or 50 years or perhaps several generations building that you want to Preserve? 

What assets and, more importantly, what family relationships do you need to Protect? 

And what decisions need to be made today so that Mum and Dad, the next generation and the farming business have the opportunity to Prosper? 

You won't answer all of those questions in five minutes.  But you can start. 

So here's my challenge to farming families this week. 

You probably know what your farm is worth. You probably know what you owe the bank. You probably know what your machinery is worth and you'll almost certainly know how much rain you've had. 

But do you know how succession ready your family is? 

If the answer is no, don't try to solve everything at once.  Start by finding out where you stand. 

Take five minutes and complete the Australian Family Farm Transition Benchmark™. Receive your Succession Readiness Score, identify the areas that deserve attention and use that information to start the next conversation. 

Because successful farm succession doesn't begin with having all the answers. 

It begins with understanding where you are. 

You can't fix what you haven't measured. 

Become Succession Ready™. 

Preserve. Protect. Prosper.