Poultry farmers are always busy — and you may be struggling to find the time to create a plan to ensure your business continues to thrive after your retirement. How can you create a succession plan to help your farm and your family navigate the path forward both before and after you make an exit?
In this article, we will review some of the challenges poultry farmers face when creating a succession plan and the necessary steps to help make your succession plan a success.
What are the challenges of succession planning?
One of the most common challenges poultry farmers face during succession planning is waiting too long to get started. It can be difficult to find the time to sit down with your family to discuss the future of your business after your retirement — and you may be worried about how to keep everybody happy. However, not communicating your plans can lead to uncertainty about the future.
We are currently seeing a trend of the next generation leaving to pursue other opportunities. This frequently happens when the next generation feels they cannot make an informed decision about the family farm without a clear plan to transition management, ownership, and control in place. It is essential to find the time to have these conversations and create a plan to ensure both your farm and your legacy continues for generations.
What happens if I don’t have a succession plan?
A succession plan also helps protect your business from unexpected events. For example, two brothers were running a family farm that their parents started decades earlier. When one of their wives asked for a divorce, they discovered that she had the right to 25 percent of the value of the farm, including the land. In this case, the parents had not required that their sons have marriage contracts or prenups to protect the business from divorce.
The brothers had to sell portions of the land to cover the divorce. However, losing part of the farm that their parents had worked so hard to grow fractured the brother’s relationship with his entire family in a time when he needed support. Having a clear succession plan that addresses all potential exits (retirement, death, or incapacity) as well as divorce could have preserved the business as well as the relationship between family members during a difficult situation.
How to get started on your succession plan
A succession plan is essential to ensure your farm continues to thrive after you make an exit. These best practices can help make your succession plan a success:
Start early
Start planning for succession early — ideally 10 to 15 years before you intend to step down from your role. This will give the next generation enough time to start working in the business, gain the skills they need to take on management or ownership, and identify and address any potential conflicts between family members.
Create family business rules
Creating a family farm constitution can help you set expectations for roles and responsibilities, requirements for management, ownership, leadership, and compensation. Additionally, it can help define your decision-making structure, reduce uncertainty, and ensure everyone is working together to keep the farm running smoothly.
Set a timeline
Many poultry farmers put off retirement — however, setting a clear timeline can help set the next generation up to succeed. If you plan to retire at 65, you can start letting your successors take on more responsibilities at least five years prior to your retirement to support a smooth transition of ownership.
Create a written agreement
You don’t need to leave your family farm when you pass it on to the next generation. A written agreement can help define your responsibilities after you step down from ownership and clarify how you’ll continue to add value in the future. This is a perfect opportunity to act as a mentor to the next generation and help them navigate the path forward.
Work with a third party
A third-party advisor can help you navigate difficult conversations with your family members and guide the succession planning process. Advisors have the knowledge to evaluate your plans, address challenges, and provide the support you need to move toward the future.
For more information about how to take the next steps toward creating an effective succession plan, contact MNP’s Danielle Bergeron-Walsh, CPA, CA, at 613.558.6859 or danielle.walsh@mnp.ca
