BY: BEN SPEEDY, ASB GENERAL MANAGER FOR RURAL
The primary sector has always been and will continue to be vital to New Zealand’s economic prosperity. So it’s important, as the current cohort of farmers retires, that we ensure a successful transition to the next generation.
We recently conducted research with Kantar and spoke to Kiwi farmers throughout the country and across industries to understand the key issues keeping them up at night, and what’s on the horizon for them. Sixty per cent said succession planning was on their minds which shows there is a lot that can be done, and conversations that can be had, when it comes to thinking about ‘what next’ for the farm.
Like any good business owner, food and fibre producers must have a plan for the future of their business. Succession can be hard for farmers and horticulturalists, and in fact bittersweet. In our experience, many of our customers who have put their whole adult lives into ensuring their farm is a functioning, profitable business have mixed emotions about the idea of selling or passing it on.
In ASB Rural we work with clients by asking questions and getting them thinking about what a succession plan could look like for them and their business, then using our expertise and relationships to help make that happen. No two farms, farm owners or families are the same and farm succession plans won’t be either.
Handing over the farm is a process that often takes time; we’ve worked with clients who have set their succession plan in motion over decades. It’s important to have independent, trusted voices at the decision table including your lawyer, accountant, or an independent facilitator such as your banker. Working with many different rural customers, with diverse backgrounds and interests, our rural bankers have been involved in supporting many succession plans and have a broad range of experience in the different options that might be available.
We believe effective succession plans are bound together by a solid plan, with all parties communicating openly and remaining flexible. If you’re looking to hand the farm over, the best place to start can often be asking yourself two questions: what is the most important thing to you? and where do you want to be at the end of this process?
It’s true generational succession is common in New Zealand because, as we’ve seen historically, it generally offers the best result and for a long time was simply what was always done. But today, not every farm has a natural successor within the family and that’s where equity partnerships, leasing parts of the farm for different purposes, or selling to an independent third party entirely come into play.
Diversification is another avenue to think about when it comes to planning your farm’s future. At its core, diversification is building additional revenue streams within your business today, while futureproofing it for the next generation.
Historically New Zealand’s farms have mainly engaged in sheep, beef and dairy farming but in recent years we’ve seen customers divesting sections of land traditionally used for grazing to forestry or horticulture, while others are seizing the opportunity for development and diversification for themselves.
In fact, the same research we carried out showed 58% of farmers were considering adjusting their farming practices to further cater to changing customer demands or supply premiums. Sustainable farms and orchards continue to be sought after and significant work is being put into achieving more environmentally-friendly practices. While diversifying may come with additional cost up front, it can help with enduring business sustainability and make your farm more attractive to prospective buyers or even provide an income stream in retirement.
Diversification is hugely varied: we’ve seen farmers get creative in a range of different ways through adding mountain biking tracks or opening up walking trails on the farm, to investing in hives for honey production to changing their farming operation entirely. We’ve also seen examples of customers leasing unproductive parts of the farm for carbon farming which can provide both financial and environmental returns. Diversifying is not without risk, so do your research and talk to experts, but we’ve seen how it can really pay off for farming families.
Remember it’s never too early to start thinking about succession and it is never too late. There’s no blueprint on how long it should or will take to transition farm ownership successfully, so take your time, do your research and who knows, you might find opportunity amid the change.
