Countryside Matters 2014 - page 52-53

Countryside
Matters
50
Countryside
Matters
51
Theaccountant
AndrewRichards
FrancisClarkAccountant
s
Inanysuccession,oneofthebiggestproblems is
whoshouldsucceed.Shouldthebusinesspassdown
fromone individual toanotherorshouldthebusiness
successionbemadeequallytoallsiblings? If it is
passedontoonechildthenshouldtheotherchildren
bepaidoff? ANewtonAbbot farmersumsupthe
dilemma:“Ihavespentmy lifepayingoffmyuncles.
Now, I’llspendtherestofmy lifepayingoffmy
brothers”.There isclearlyaconflictbetweenwhat is
fairandwhat isfinanciallymanageable.
There isalsoasignificantdifferencebetween
businesssuccessionplanningandestateplanning.
Maintaining familyownershipof farmland, for
instance, isnotthesameasmaintainingthe family
farm.The former isan investment inan illiquid long
term,highlyappreciable,fixedasset.The latter isa
business. If inheriting farmlandcreatesa farmerthen
inheritingacalculatorcreatesanaccountant!
Whilsttheoddsareoftenagainsta family
businesscontinuingthroughsuccessivegenerations,
Ibelievethatwiththerightplanning,particularly
withthesupportofastrong familyconstitution,
there isnoreasonwhymore familybusinesses
shouldn’tcontinuetogrowandtoflourish.
The landagent
JamesDennis
SmithsGore
Properlyplannedsuccession is fundamental tothe
growthof familybusinesses. Itensurestheprotection
of familywealth,providescertainty forthenext
generation,providesreassuranceofcontinuityto
partnersandcustomersandensuresthatsuccessors
canobtainappropriatetrainingandskills. Italso
providescertaintytothosemembersofthe family
whomaynothavearole inthe futureofthebusiness.
Conversely,a failuretoaddresssuccessioncan lead
toentrapmentoftheoldergeneration,disillusionment
inthenextgenerationand lossofconfidence
fromcustomersandstaffaswellasmoretangible
drawbackssuchas increasedexposureto inheritance
tax.
Theprocessneedstobeapproachedwithcare,
however.Communication iscriticalwithdifficult
decisionsoftenneeded,assessingtherelativeskills
ofsiblingsandensuringthatthosewhoarepassed
over forothersarenotalienated.Oftenoneofthe
greatestchallenges is fortheoldergeneration in
havingtocedecontrol.Oneoftenhearsthe jokeabout
howthegrandparentretainsthechequebookonthe
family farmbut it isoftenreality, leavingtheyounger
generationwitha largetaxbilland fewskillstoaddress
theproblemwhenthe inevitablehappens. It isasad
legacyto leave.
Theacademic
RichardSoffe
DuchyCollege
It issaidthat familiesandbusinessdon’tgo
togetherand,particularly in farming, thetwoare
sooften linked.Succession isprobablythebiggest
single issue. Takethisscenario, forexample:
Onone farmtheyoungergeneration,whoare
newlymarried,havepluckedupcouragetosuggest
ameetingaboutthe longtermsuccessionplans
onthe farm.Theygatheraroundthekitchentable,
with father inhischairatthetopofthetableand
theyoungergeneration intheseatsthey’vehad
sincechildhood. Thenewdaughter-in-lawsits
veryquietlyandmother isuncomfortableabout
theconversationsoretreatstomakecoffee for
everyone.Predictably, thediscussion isdominated
bythe fatherandeveryoneskirtsaroundany
discussionofownershipandsuccession.No
decisionsaremade.
AttheDuchyRuralBusinessSchool,wehelp
farming familybusinessesdiscussthesubjectof
successionsensiblyandproductively. Inorderto
achievethiswesuggestsomesimplemeasures
suchasmeeting inavenueaway fromthe farm
andbringing-inan independent facilitator. We
encourageeachmemberofthe familytooutline
theirhopesandconcernswiththeaimofreaching
anoutcomethat isacceptabletoallofthem.
Thesolicitor
JamesGriffin
EverysSolicitors
Thedifficultdiversionsthatcanaffecta family
businessareoftenreferredtoasthesixDs;death,
divorce,distrust,departure,deteriorationand
disinterest. Whenyouconsiderthat42percentofall
marriagesend indivorceandthatdeath isacertainty
forallofus, theadditionalburdens facedbya family
business,asopposedtoastandardboardroom,
becomestartlinglyclear.
Successionplanning iskeytothesurvivalof
a familybusiness;providingaroadmapthatnot
onlyoffersclarityaround futureownershipand
governancebuttheopportunitytoreviewthe
businessandtodosomecareful taxplanning.Pre-
nuptialagreements,partnershipagreements, tenancy
agreementsandwillsshouldalsobeconsidered
aspartofthesuccessionpackage. Coupledwitha
robust familyconstitution,whichcanbeproduced
withthehelpofathird-party, the framework is in
placetoenablethebusinesstosmoothlypasstothe
nextgeneration.
Whilemany familybusinessesdelaythese
decisions,believingtheycanbemadeonanotherday,
theonesthatareplanningaheadarethecleverones
–andthesuccessfulones.
PatrickMcCaig,OtterBrewery
Fromhumbleback-room
brewingtoaweekly
productionof2000
casks, familyrootshave
alwaysbeenattheheart
oftheOtterBrewerybrand.
DavidMcCaigbrewedthefirst
officialOtterBrewerypint in1990,
decidingtobranchoutfromrunning
aB&Bandmakingabitoffurniture.
Davidbuiltthebusinesssteadily
withhiswifeMaryAnn,andwas
joined in1995bysonPatrickand
later in2006byyoungersonsJoe
andGus.Gus isatrainedchefand
in2006, togetherwithJoe, the
brotherstookovertherunningof
anOtterBreweryPub inHoniton,
“TheHolt”.Althoughthecompany
nowemploys32people, the
familyremainsatthecoreofthe
businessandtheycontinuetogain
enormouspleasurefromthehard
workandpriderequiredtoproducea
consistentlygoodbeer. Suchstrong
valueshavedefinedthecompany’s
renownedcustomerservice.Most
ofthesalesteamhaveworked
theirwayupthroughthebusiness-
theyoftenallgathertoeata lunch
preparedbyMaryAnn.“We’reable
todiscussallsortsofthings,which,
actuallymakesthebusinessrun
better”,explainsPatrick,sowhen
sellingOtterBeertopubstheyare
allcompletely intunewiththeOtter
Breweryfamilybusinessethos.
Evenontherareoccasionthat
DavidandPatrickdisagree, their
relationshiphashelpedthemfind
therightanswer.Patricksaysof
hisfather:“Hehasan infectious
enthusiasmforhisproductand I
loveselling it.”
Whilesomethoughthasbeen
giventosuccessionplanning,
Patrickrecognisesthat“this is
where itgetsdifficult”. Onething is
clear, though, ifhischildren,nieces
ornephewswantto jointhebusiness
thesamestoryapplies-“Goand
getsomeexperience, thenbring
somethingbacktothebrewery.This
willhelpfacilitate, thegrowthand
evolutionofthebusinessoverthe
generationstocome.”
Views from the top...
CASE
STUDY
RURAL FAMILY BUSINESS
RURAL FAMILY BUSINESS
PatrickMcCaig
ofOtterBrewery
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