Succession Planning Fair and Equal or is it?

Are “FAIR” and “EQUAL” the same thing?

By John Moor

When the topic of fairness comes up in family conversations so do statements like these……

We are trying to please everyone, and it is just not working out, it is actually getting more difficult

As the non-farming sibling, I am being overlooked and the others are getting everything, it’s just not fair

Dad wants to divide it all up equally, I have been here 20 years, what’s that worth?

I believe, “a successful family farming business is not like a meat pie, you don’t just simply take it, cut it into 4 equal pieces and hand it around at the dinner table”.
A clear vision, good planning, and emotional intelligence on the part of the whole family is needed to make succession planning work.

Does the plan consider your needs, those of your spouse or partner, should you no longer be there? Will you have enough income or preserved funds to finance your post working lifestyle? Where will you live, what will you do. These are all questions that the whole family should be involved in discussing to get the best inclusive answer.

A profitable farming business has hard working partners that deserve to be compensated for their contribution in creating wealth, preserving this wealth, and growing the asset base of the business. I always tell sons and daughters coming back into the family business to start building their own balance sheet (and grow it in their own capacity) and also to make sure that the business has an accurate way to keep track of the increase of the businesses net worth while they are there. All too often a son or daughter will work for years and all they are doing is adding value to their parent’s or non-farming siblings balance sheet and have absolutely nothing to show for 20 years of work. Except a promise!!

Yes, succession and continuity planning is primarily to do with the transfer of management and skills over time, and estate planning is to do with the transfer of assets and should be dealt with very differently.

“Sweat Equity” is a term I use to describe the work and effort one has put into the business, and often not compensated for adequately!!!
Ask yourself this, am I paying my son, daughter, or in-laws a fair market related wage??

If not, then the difference between what they are getting and what they could be earning somewhere else forms part of their “sweat equity” contribution to the business. They are putting everything in and should be rewarded, NOT by the all too common promise of “all this will be yours one day my son/daughter”

Sweat equity is normally a sore point with the non- farming siblings. Too often non-farming brothers and sisters who are earning great city salaries forget about the sacrifices paid by those who stayed behind to help mum and dad. Time passes and soon 20 years of sweat equity is built up with nothing to show. No management or ownership agreements to prove the value of the commitment from the son or daughter. So if you can’t put a value on the sweat equity you need to turn over ownership of real equity, and this is where succession and estate planning get into a mess!!!

People will work harder, be more committed and there will be less conflict when they know they are working towards and building equity for themselves and their families.

You will get closer to discovering this for your business the more open and honest the communication is within the family. You will need to have courageous conversations about people’s expectations, needs and wants. This can be easily facilitated by a trained and professional facilitator.
My definition of a facilitator is someone who can create a new space into which negotiating parties can safely move and allow the negotiating parties to create new and different options while understanding the others point of view.

John Moor
0449 887 875