Business changes and succession: talking things through

If you feel isolated or uncertain about the future and you are unsure how to improve the financial performance of your business, sharing the problem with others can help. 

Many people and organisations are willing to offer help, sometimes free of charge. It is important to talk about the issue sooner rather than later. Do not delay to the point where your health suffers and you are having sleepless nights. A problem shared can be a problem halved.

Many farmers do not like sharing financial information with others, particularly if business failure is a potential outcome. Talking to family and friends may be difficult, but there are others you can turn to.

  • The Farm Community Network has a team of experienced volunteer business consultants
  • Professionals that already understand your business, such as your bank manager or accountant, are also good sources of advice
  • On a more positive note, if you are seeking to improve the profitability of your business, an independent specialist agricultural consultant can guide you

Visit our support for farmers page for more organisations who can help.

Speaking to your family

If you are thinking about making changes to your business, it's important to talk to your family and business partners to make sure you are on the same page.
Some conversations can be difficult, but the long-term benefit will outweigh the short-term discomfort.
It is important to tell your family about your thoughts and feelings regarding the business and any assets. Don't assume that because children work far away that they are not interested in taking the business forward, just be prepared that it might be in a different direction. Likewise, family members currently in the business may be feeling the pressure of continuing in the business but are reluctant to say anything.

Writing down your personal objectives for your future can help clarify the situation and aid discussions with your family.

The video and links on succession planning below are more specific to conversations with your family, but can apply to other conversations about the future of your business.

Speaking to your employees

Regular conversations and meetings with your employees is good business practice. Share with them your vision for the future and how you plan to help achieve it. Encourage them to contribute ideas. If they feel trusted and engaged, they are more likely to help the plan succeed and come to work with a positive attitude.

Discuss the team’s achievements and progress at regular intervals and review next steps with them. If circumstances arise that hinder your planned progress , share the reasons with the team and develop solutions together to get back on track.

Speaking to a financial expert

Don’t go through stress alone. Talk to your spouse/partner or friends and family as a first step. Then talk to your bank manager and other finance providers. Doing this early will put you in a stronger position to ask for borrowing restructuring or repayment holidays.

Your bank manager should be concerned about the future profitability of your business and your ability to cover loan and interest repayments, private drawings and future capital investment. Although lending decisions are based on your net worth (and your ability to service the loans or bank overdraft), this position can deteriorate over time, due to changes in profitability, or challenging events.

To help ensure continued support, keep the bank manager informed. Consider providing a copy of your audited accounts each year, your forecast of future trading income and expenditure, and any major capital expenditure that is planned. It is far better to discuss any need for increased lending with the bank well in advance. Try not to breach your overdraft limit until you have had this conversation.

Contact your suppliers. Merchants and other creditors will want to keep your business and will likely be open to discussing a repayment structure.

Have you addressed paying the tax bill from the last financial year? Talk to HMRC about organising a payment structure.

Speaking to your accountant

The primary aim of an accountant is to prepare audited accounts for your business. These are produced for income tax purposes and should help reduce your overall tax liability. Good accountants will help ensure these are prepared as close to the year end as possible. They provide you with a summary of income and expenditure.

This information will help benchmark your performance and plan the next year. In many instances, audited accounts do not provide an accurate value of your net worth. This may be due to historical land and building valuations, or because the breeding livestock are valued on the ‘herd basis’.

The accountant will have first-rate knowledge of all taxation issues. They should be consulted for advice on any major business changes, such as diversifying into non-farming enterprises, succession planning, or when considering retirement. They will be able to make you aware of inheritance tax, Capital Gains Tax, stamp duty and value added tax (VAT) issues that may affect you in the future.

Speaking to a consultant

A good consultant will understand the challenges and opportunities that you are facing. They will have other clients dealing with similar issues and can provide guidance. They understand the physical and financial benchmarks you should be aiming to achieve, and are well-versed in the preparation of gross margins, budgets and cash flows. Those with both technical enterprise expertise and business knowledge can dovetail these skills to help provide practical solutions.

If family members or business owners are not in agreement, the role of the independent consultant will be to help gain consensus by providing analysis. In some situations, the best solution may be to downsize or even cease farming activities altogether. This advice may not be well-received by all members of the family. A consultant should add value to the business by helping improve performance and profitability, to provide a good return on the investment in their time.

British Institute of Agricultural Consultants (BIAC)

T: 01275 375559