succession-handsRCS succession and continuity planning facilitates families to create their desired futures


  • Are you tired of the conflict in your family?
  • Do you see a better or different way of doing things but can’t get it past others in the family?
  • Is the thought of facing the family issues causing a great deal of stress and pressure?
  • Do you want clarity for your future?

If you have answered yes to any of the questions above, then perhaps it is time to look into some succession and continuity planning. The journey of a thousand miles begins with one step.

That step could be as simple as downloading a copy of our succession and continuity process and frequently asked questions.


Is now the right time for us?

The sooner you start the succession and continuity planning process the more likely you are to have a positive outcome.

Catalysts to succession planning include:

  1. After all the children are born.
  2. A child returning home to the property to work.
  3. When a child brings home a spouse.
  4. Somebody (may even be outside of the family) has expressed a desire to continue the business into the future.
  5. When the internal conflict is threatening the business survival.

In cases of current family conflict or pending business failure it might be useful to explore conflict resolution or more detailed business planning prior to beginning the succession process.

Your RCS advisor will assist to address these issues before your succession process begins.

succession-couple

The RCS process involves an initial discussion to develop a personal program tailored specifically to your family’s needs and situation. After this you will establish who your RCS contact will be. Their job is to lead you through the program and act as your personal advisor.

From this point onwards, your exciting succession journey begins and the direction you take will be the pathway for your future.

RCS uses an established method which generally follows the steps below. The detailed process for any client will vary depending on their requirements and family and financial positions.

  • Initial discussion
  • Reaching an agreement and program tailored to the family needs and situation.
  • Establishing who your RCS contact will be. This person will lead you through the whole program and be your point of contact throughout.
  • From there it could include:
    • Establishing individual vision & goals (as prepared to date), usually by email or fax
    • Phone discussion with each individual to gain their personal perspective.
    • A family meeting (# 1)
  • RCS will then conduct an independent business analysis with benchmarks and develop forward cashflow and balance sheet projections on which to base sound decisions.
    • A family meeting (#2)
  • Seek taxation and legal advice on the options developed and the business analysis provided.
    • A family meeting (#3)
    • Implementation using selected advisors.
    • During this process, your RCS advisor will follow progress and prompt action.
    • Celebration

 

Do we need to do everything in the list above?

No. Identify and select the requirements during the initial program planning process. It will be tailored to clients’ own needs and stage of progress towards succession.

However, if the planning process is beginning late, there is no current clear plan and there is existing conflict in the family, all the steps above are likely to be required.

Definition: In a nutshell, succession is the process of moving both business management and assets from one generation to another while providing security to all generations.

The goal of a well planned succession process, should be to turn a frequently perceived negative experience to one which is positive for all and which assists all stakeholders to provide a framework for their preferred futures. Every member of the family should look forward to and be excited by what they can see.

Depending on the family and business structure and the strength of family relationships, succession may not be the right process to address existing family issues. In cases of current family conflict or pending business failure it might be useful to explore conflict resolution or more detailed business planning prior to beginning the succession process.

Where there is either current conflict or the potential for it, we also recommend attending the Landmark Forum prior to engaging in succession planning. This is a three day program which helps us understand the workings of our own mind and emotions. A critical outcome of this program is to understand that the only person we can change is ourselves, regardless of how much we might like to change someone else in the family.

Over the last 25 years it has been obvious that the word retirement is a blockage to progress for many people. The word conjures up images of going to town and doing nothing, of becoming redundant and useless.

Our definition of retirement is very different.

It is simply THE FREEDOM TO CHOOSE.

This means being in a position to CHOOSE to work or not work, the type of work you enjoy, to travel or not travel, to invest off farm or not invest. There is absolutely no reason why you cannot achieve more in the second half of your life than you have in the first.

The simple answer is – AS EARLY AS POSSIBLE. This could be as simple as seeing a financial advisor when the children are born.

Catalysts to succession planning include:

  • After all the children are born.
  • When the last one goes to primary school.
  • When the last one goes to high school.
  • A child returning home to the property to work. (Top Down – Roles and Responsibilities required)
  • When other children return home.
  • When a child brings home a spouse.
  • When anyone becomes ill or incapacitated.
  • When the internal conflict is threatening the business survival.
  • A rethink of the vision and goals of the older generation.

Succession can be driven from one or up to four directions. The more directions it comes from, the higher the likelihood of conflict. Starting at 1 to 3 above means Front End, Top Down Planning (see diagram below). At this stage of a business it may be as simple as developing off farm investments.

As the stages move towards children returning to work in the business; some Bottom Up, pressure comes into play. Numbers 4, 5 and 6 above indicate this stage.

If pressure is coming from Top Down (older generation) and from Bottom Up (younger generation) at the same time, the level of conflict will rise. If the process is only started when it is forced to (Back End), the level of conflict is likely to be high. The only direction which limits conflict is to start early from the Front End and from the Top Down.

succession-diagram

Absolutely, and the difference is fundamental to the way RCS deals with the issues.

Management Succession is the process of gradually handing over day to day management RESPONSIBILITIES from a senior to a junior generation. It should be a planned, training and skill development process for the younger generation and an easing of workload for the older generation.

During this process of change, the strategic direction of the business will initially be the responsibility of the senior generation, then move to joint decision making and eventually pass completely to the next generation.

It is important to note that there are no pre-determined timeframes surrounding succession, eg retirement is often the final stage of the entire plan for the older generation, not necessarily the first.

Estate Planning on the other hand, is about ASSET transfer. This can happen on an entirely different timeframe to management succession.

The RCS process differentiates between these two steps by splitting the overall business into its two parts i.e. the PRODUCTION business (the crop and livestock business) and the LAND business.

Off farm investments could be a third category of analysis as these are very common now and depending on the type of business, they may also be separated to assets and production/yield.

RCS uses an established method which generally follows the steps below. The detailed process for any client will vary depending on their requirements and family and financial positions.

  • Initial discussion.
  • Reaching an agreement and program tailored to the family needs and situation.
  • Establishing who your RCS contact will be. This person will lead you through the whole program and be your point of contact throughout.
  • From there it could include:
    • Establishing individual vision and goals (as prepared to date), usually by email or fax.
    • Phone discussion with each individual to gain their personal perspective.
    • A family meeting (#1) to:
      • Firstly determine the agreed purpose and desired outcome.
      • Discuss vision and goals. The visions are the inspiration, the goals the motivation.
      • Review individual and set business goals.
      • Determine the constraints to achieving goals.
      • Set ground rules.
      • Table the Balance Sheet and P&L.
      • Record areas of agreement.
      • Outline the next steps.
    • RCS will then conduct an independent business analysis with benchmarks and develop forward cashflow and balance sheet projections on which to base sound decisions.
    • A family meeting (#2) to:
      • Develop options for the future.
      • Record agreement on those options.
      • Record disagreement on those options.
      • Sign off on agreement.
      • Agree on advisors to use for next step.
      • Seek taxation and legal advice on the options developed and the business analysis provided.
    • A family meeting (#3) to:
      • Decide on appropriate actions.
      • Allocate responsibility for carrying out actions.
      • Agree on a timeframe for action.
      • Sign off on agreement.
    • Implementation using selected advisors. These could include experts in:
      • Taxation
      • Business structure
      • Wills and power of attorney
      • Off farm investment
      • Insurance packages
      • Financing
    • During this process, your RCS advisor will follow progress and prompt action.
    • Celebration!

Do I need to do everything in the list above?

No. We will identify and select the requirements during the initial program planning process. It will be tailored to your own needs and stage of progress towards succession.

However, if the planning process is beginning late, there is no current clear plan and there is existing conflict in the family, all the steps above are likely to be required.

Yes you can. You should be comfortable with your advisory team especially when it comes to detailed financial and legal advice. RCS does have access to a network of trusted partners in these areas should you require their assistance.

Before we start it is always a good idea to have key details ready to ensure the best results. These details could include; goals, financial records, off farm assets or current valuations, legal documents like will or family trusts. Any drafted succession agreements or business plans are also useful.

In our experience over the last 30 years, around 80% of succession plans are successfully resolved. Some are so intractable due to people issues, that all choose to remain in the misery it usually creates rather than make the hard decisions. In this situation it is important that people are not trapped – that they understand that there are options and that there are tools to explore those options.

DO’S:

  • Be proactive
  • Be willing to make and act on decisions
  • Establish clearly that responsibility for succession planning lies with the older generation
  • Be open about needs and feelings
  • Have clear goals
  • Have clearly communicated and agreed desired outcomes
  • Have a sound process and help to navigate a way forward
  • Understand the business strengths and weaknesses
  • Get good accounting and legal advice on options
  • Participate fully and openly in an atmosphere of trust and accountability
  • Have a clear understanding of ‘fair’ versus ‘equal’. Appreciate the value of timing e.g. money at a strategic time in ones life can have far more value than an equal share later on
  • Create a plan and take control
  • It is preferable to have some form of “heads of agreement” drawn up between the parties before lawyers (in particular) and accountants become heavily involved in the process.

DONT’S:

  • Pretend emotions and feelings don’t matter
  • Have hidden agendas
  • Have an older generation who won’t make tough decisions and act
  • Let greed overcome common sense and personal values
  • Hand jointly owned assets to siblings
  • Make promises to children before a properly evolved plan is prepared

People:

  • Lack of trust and openness
  • Destructive attitudes/personalities
  • Greed from one or more parties
  • Emotional attachment
  • The emotional beliefs surrounding the word ‘succession’
  • Lack of vision and goals for all parties
  • Seen as a threat rather than as an opportunity
  • A lack of understanding of the financial implications
  • Fear of change or loss

Finance:

  • Poor financial records and valuations
  • Poor understanding of the business and finances
  • Unrealistic expectations of potential returns
  • Excessive debt and poor business performance
  • Lack of tax knowledge relating to small business CGT exemptions and retirement concessions
  • Poor understanding and therefore high perceived risk attached to off farm investments
  • “Equity” is fine but the cashflow implications for all parties must be clearly understood

People issues are the first priority in succession planning. If everyone is on the same page and working openly and honestly in an atmosphere of trust and accountability, it is possible to resolve issues amicably and in a realistic timeframe to achieve a positive outcome for all involved.

This can only happen over time and with the creation of trust. To facilitate this, the process will not be rushed. Additionally RCS has a large number of PROCESSES which have been used over a long period of time and trained experienced facilitators to assist in overcoming barriers.

  • Financial records – accounts, off farm assets, current valuations etc
  • Any current legal docs, wills, trusts etc
  • Business planning documents
  • Any drafted or agreed succession plans
  • Goals
  • Goodwill

RCS will use its 30 years of experience to:

  • Assist the family to get the best outcome for all
  • Facilitate the family meetings
  • Drive the process and help maintain momentum
  • Assist with the business analysis

RCS does not provide advice in specialist areas such as taxation, off farm investment, insurance, legal arrangements and accountancy. However we have a long associated history with some providers.

A simple, straightforward succession plan with no conflict can be developed and enacted in one year.

Generally, however, it can take six months to a year to clarify goals, develop viable options and get accounting and legal advice on the options. Full implementation is often then driven by taxation timeframes, which can stretch over years.

Timing, however, is largely due to the commitment of the key decision makers in the business. Once commenced, it is important to maintain momentum.

  • Be willing to make and act on decisions.
  • Be open about needs and feelings.
  • Do participate fully and openly in an atmosphere of trust and accountability.
  • Have clearly communicated and agreed outcomes.
  • Have a clear understanding of ‘fair’ versus ‘equal’.
Our Guarantee

With RCS your personal succession journey will begin to unfold in a supportive, professional and productive environment. RCS will use its 30 years of experience in working with agricultural families to assist you to achieve the best outcome for all involved.

Our facilitators have life experience and have been trained in business analysis and strategy and in facilitation and conflict resolution techniques.