NAB urges farmers to rethink succession planning
A major survey conducted by NAB Agribusiness found that farmers approaching retirement are far less certain about how and when they’ll transition out of the business compared to younger farmers. Read on for more survey findings
It is critical that Australian farmers have clear succession plans in place to ensure Australia’s agricultural sector is well positioned to capitalise on the increasingly important role of feeding Asia’s economic growth.
This is the view of National Australia Bank (NAB) Agribusiness following a major survey which found that farmers approaching retirement are far less certain about how and when they’ll transition out of the business compared to younger farmers.
According to General Manager of NAB Agribusiness, Khan Horne, what is striking about the research findings is how clear a picture young farmers have about their plans for the business.
“They have strong hopes and aspirations for their businesses right through until they retire,” Mr Horne said.
“However, of those farmers aged 70 and over, more than one third did not know when they would exit the business. This is a massive percentage, given they’re technically over retirement age.
“Without strong succession planning, farmers are more likely to have circumstances dictate, rather than being in control of, the future of their businesses,” Mr Horne said.
The survey was conducted by NAB Agribusiness and covered more than 5000 agribusinesses across multiple industries Australia-wide.
- Around 90 per cent of respondents under the age of 40 have a very clear timeframe for retirement or transitioning out of the business. However, 36 per cent of those 70 years and over do not know when they will retire.
- When it comes to what will happen to the business, farmers expecting to stay involved for at least another 20 years are largely confident they will pass it on to their children or other family, at 65 per cent.
- For those looking to retire in the next two years the figure drops down to 28 per cent. Almost half expect instead to sell it to someone not currently involved, while 17 per cent of owners intend to wind down their business and it will then cease to exist.
- Business owners’ plans for the future vary by type of agriculture – grain growers are more likely to pass their business onto their family, while those in horticulture are less likely to pass their business onto family and the most likely to wind down their business on retirement.
Commenting on results, Mr Horne said that succession planning is often delayed due to concerns about the stress or challenges it will cause those involved.
“In reality, farmers need to continually revisit their plan to ensure they are able to take advantage of opportunities as they arise.
“Planning early and having the flexibility to continue the conversation and adapt the plan as circumstances change is important to ensure it’s part of normal ongoing business and financial planning, rather than a one-off exercise.
“One of the reasons so many older farmers aren’t planning to pass the farm on might be because their children are pursuing other opportunities and they are unsure of when, or even if, they may take the reins,” Mr Horne said.
“With the average age of farmers being 49 years*, we need to ensure Australia’s agribusinesses feel confident to have discussions about the future of their business throughout various stages of their development.
“This is vital to ensuring the industry remains prosperous and well positioned to take advantage of growth prospects in Asia.”
Mr Horne said the NAB Agribusiness team works closely with other specialists, including agribusiness financial planners based in both rural and metropolitan regions.
*Australian Bureau of Statistics, Census, 2012
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