The Road to succession – One destination, countless routes
Which is the right farm succession plan? That depends on a lot of variables. One of the best strategies is to learn from what others have done. Apply what works, avoid what doesn’t and modify when necessary.
Here are two stories:
Succession is nothing new to David and Wendy Brenn, but it’s never been like this before. The Brenns and two of their three children operate Brenn-B Farms Ltd. in Waterdown, Ont., complete with 1,300 acres of potatoes, broccoli, herbs, cash crops and a 200-head feedlot.
David is the third generation on the family farm and now, as he and Wendy travel down the succession planning road with their sons Chris, 31, and Shawn, 30, they have the advantage of hindsight. The couple purchased the farm from David’s father in 1979, when they were the young hotshots coming on to the farm with all kinds of ideas.
“David returned to the farm full-time in 1976 and began to grow different crops and employ more people,” Wendy says. “Dave’s dad was not comfortable with all of the changes and decided to sell to us.”
The couple purchased the home farm and, a year later, expanded their operation by purchasing the neighbouring land that was also owned by David’s father.
“We had many tough years answering to the banks and staying afloat,” Wendy explains. “We took out 25- and 30-year mortgages in the high interest years of the early ’80s.”
Despite the tough times, the older Brenns worked hard alongside the younger generation. Wendy says without the advice, ideas and reassurance of the older generation, their farm would have failed.
Today, Wendy and David are the older generation and are determined that succession will be different this time.
“We have assets outside the corporation that will provide some retirement benefits,” she says, noting they’ve implemented an estate freeze, a detailed evaluation of all company assets that allows each shareholder to know their value at a specific date. “This allows the next generation to own the future growth from that date on,” Wendy explains. A new share structure of the company is also in place.
One major challenge the Brenns have identified is that producers tend to be asset rich and cash poor.
“We need to find a way to get money out without causing cash flow problems.” Through a combination of insurance, wages, and share purchases and redemptions, Wendy says she and David will be able to live comfortably on past equity without creating a huge debt load for the next generation.
The careful planning and attention to detail come from their experience taking over the farm 30 years ago.
The next generation is able to embrace the new technology with little fear and great expectations, just as we were able to do. As you get older, change does not come as easily – we saw this with our parents and now with ourselves.”
The Brenns plan to pass complete control and ownership to their sons within the next five years, but reaching this point in their transition process has been a long, hard road. And while they support hiring experts to help with succession, Wendy points out that getting each of those pros on the same page was one of the most challenging parts of the planning.
“The accountant, lawyer and financial planner all use their expertise, but did not always communicate well with each other. We were always waiting for one of them to proceed to the next step.”
The Brenns also gained wider experience with farm-based groups like Canada’s Outstanding Young Farmers, which introduced them to producers across the nation and showed how different farms deal with succession.
“It exposed us to many different farm families and their personal successes and challenges,” David says. “We have encountered many different situations and learned a lot in the process.”
Within the family, the Brenns say equality and honesty, combined with a good head start and a few other key elements, are worth their weight in gold in succession planning.
“Every family member must be consulted and treated fairly. Consensus does not come easily. Have open family discussions, start long before necessary, have knowledgeable experts, talk to others who have been through it and be flexible,” Wendy says.
For brothers Adrian, Denis and Robert Breault – and six of their children – the secret of working together is equality. The brothers bought their dairy farm near Sherbrooke, Que., from their parents in 1976. They expanded from 100 cows and three barns to nearly 350 cows today.
While some producers are anxious to find someone to take over the farm, the Breault brothers have six willing partners to take over the operation. “This is something that we have been preparing for a long time,” Adrien explains. “You don’t just decide that one day you’re going to sell.”
The group works well together, and Adrian points out that the farm profits from the economy of scale, more than if everyone owned their own farm.
Adrien says none of the kids were pressured to stay home to take over the family business. In fact, some of the next generation left and returned home. Others opted not to return to farming. “It was always their choice to work on the farm or away or outside the farm,” he says. “But they chose the farm and we are really happy about it.”
For such a large group, each with a vested interest in the family business, working together has its challenges, but the Breaults sat down and developed a common plan for their dairy operation.
“We have a vision,” Adrien says. “We needed a vision that analyzes the current situation, the economic situation and we made decisions. But you have to be prepared. You don’t just decide that day. And after you make your decision, take the time to organize the business and to be ready.”
The Breaults’ strength in numbers and talent is an advantage when it comes to finding work-life balance.
“Since there are a bunch of us, we can take weekends off or take holidays,” Robert says. “We are more flexible because everyone does all the jobs on the farm. We don’t have any specialists – we are all versatile.”
As the family looks to the future, they remain confident that transition of ownership will be a seamless process.
“The kids are ready to integrate themselves in the business and the transition will happen gradually and simply,” Adrien says. “We are ready. The future of the business today is more on their shoulders than ours.”
The Breaults agree that a key step in transition is having a network of professionals to help with the process. Adrien believes that whether it’s animal nutrition, soil conservation, planning or accounting, that team is essential.
“That is one of the big secrets – to surround yourself with good people, people you trust.”
There are ample resources available to help with the succession process. Here is a small selection of resources available online:
Also, check out www.fcc.ca/learning for upcoming Estate Planning and Transferring the Farm workshops.
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