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Succession Planning Research 2015

Succession Planning Research 2015

Methodology ExecutiveSummary

Respondent Profile

Main Findings

Summary of Findings

Background and Objectives

The NFU Mutual offer farmers financial advice, including that of succession planning. To raise the profile of their capabilities and services in this area, they commissioned Farmers Weekly to undertake a piece of bespoke research which will provide unique content to feed into a feature in Farmers Weekly.

Specifically, research was

required to:

Quantify how many farm owners have created a succession plan

Measure what those succession plans contain

Measure the barriers to creating a succession plan

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Background & Objectives

MethodologyIn order to provide a

robust sample for the

study, research took

the form of a

quantitative online

survey conducted

amongst over 1.110

respondents.

Results are shown on those

answering each question.

A Farmers Weekly

branded email was sent

to the database inviting

potential respondents to

take part in the online

questionnaire.

The survey was also

promoted via Twitter, and

in articles on FWi.

Fieldwork, data

processing and

analysis took place

March & April 2015.

4

Background and Objectives

Methodology ExecutiveSummary

Respondent Profile

Main Findings

Summary of Findings

Succession Planning Research 2015

Respondents expect farms will be handed on to the next generation within 7 – 9 years.

Less than half of respondents (40% overall) have a succession plan in place.

Of those with succession plans in place, it is most likely to be ‘a written document embedded

within the business plan’ or ‘an informal understanding discussed with successors’.

Succession plans are most likely to have been communicated to family & successors only.

Challenges in creating a formal succession plan were most likely to be ‘the conversation is

difficult to have’, ‘the farming business can only support one successor’ and ‘the owner does

not want to retire’

Executive Summary

6

Background and Objectives

Succession Planning Research 2015

Methodology ExecutiveSummary

Respondent Profile

Main Findings

Summary of Findings

RegionOwner Successor

South West 20% 18%Midlands 17% 17%East Anglia 13% 12%South East 11% 12%Scotland 11% 8%Yorkshire & Humberside 7% 9%North West 7% 6%Wales 6% 8%Northern Ireland 5% 4%North East 4% 5%Outside UK 0% 0%

Age Owner Successor

Under 25 1% 29%25 to 34 3% 29%35 to 44 6% 18%45 to 54 25% 9%55 to 64 38% 9%65 or over 27% 6%Average 57 36

Base: All respondents answering (owners 414, successors 301)

Size of farmOwner Successor

Less than 20 hectares 5% 5%20-99 hectares 29%* 22%*100-199 hectares 32% 30%200-499 hectares 26% 31%500 hectares or more 8% 12%

Average 203 239

Base: All respondents answering (owners 410, successors 301)

Respondent Profile / 1

8

Type of respondent OwnerSuccessor

I / my family own a farm 76% 73%I / my family have a farm tenancy14% 13%I / my family farm with a mixture8% 13%I / my family farm as part of a joint venture

2% 1%

Base: All answering (owners 414, successors 301)

Base: All answering (owners 414, successors 301)

* = significant difference

Enterprise typeOwner Successor

Cereals 62% 62%Oilseed Rape 35% 37%Beef cattle 50% 53%Breeding ewes 35% 36%Dairy cows 19% 18%Renewables 19% 15%Pulses 18% 15%Potatoes 10% 6%Poultry 10% 10%Forestry 10% 7%Sugar Beet 7% 8%Vegetables 6% 6%Pigs 8% 6%

Respondent Profile / 2

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Gender

Base: All answering (owners 399, successors 296)

Base: All answering (owners 400, successors 296)

Male

Female

83%

17%

72%

28%

Successor

Owner

Generation of farmerOwner Successor

1st generation 25% 5%2nd generation 25% 23%3rd generation 30% 43%4th generation or more 20% 30%

Base: All answering (owners 411, successors 297)

Expectations of time of handing farm over

Respondent Profile / 3

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Current status

Base: All answering 754

Base: All answering (owners 355, successors 270)

Owner and main decision maker, still active on the farm

Tenant farmer

Potential successor, already active on farm

Potential successor, not active on farm

47%

8%

31%

9%

Successor Owner

Within the next five years

5 - 10 years

11 - 20 years

20+ years

On the death of the present owner

23%

31%

26%

8%

13%

25%

33%

20%

2%

20%

Successor Owner

Average: Owner 8.8 yearsSuccessor 6.7 years

Owner 55%Successor 39%

**

* = significant difference

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Legal documents / products have have in place

Q In addition, do you have any of the following in place?

A will

Personal pension

Investments other than the farm (i.e. shares, buy-to-let property)

Life assurance

Partnership agreement

A power of attorney

Trust documents

Other

79%

63%

56%

46%

40%

26%

18%

3%

84%

69%

59%

52%

40%

25%

18%

4%

70%

50%

51%

37%

40%

29%

17%

1%

Successor

Owner

All

Base: All with a succession plan answering 685 (owners 404, successors 245)

**

**

**

**

* = significant difference

Background and Objectives

Methodology ExecutiveSummary

Respondent Profile

Main Findings

Summary of Findings

43%

54%

4%

Owners

YesNoDon't know

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Whether farming business has a succession plan

Base: all farmers responding (414)

Q Does your farming business have a succession plan?

Base: all successors responding (301)

33%

50%

17%

Successors

***

*

* = significant difference

14

Whether believe a lack of succession planning is a threat to the future of the farm

Q Do you think a lack of succession planning is a threat to the long-term future of your farm?

Yes

No

64%

36%

58%

42%

74%

26%

Successor

Owner

All

Base: All answering 724 (owners 391, successors 296)

*

*

*

*

* = significant difference

15

Contents of a succession plan

Q What should be included in a Succession Plan?

Land

Buildings & other farm assets

Finance & loans

Partnership, tenancy, contract farming agreements

Structured timings for handing over the business

Contingency plans

Other

90%

90%

70%

67%

58%

52%

4%

89%

87%

63%

60%

50%

43%

5%

92%

92%

79%

76%

70%

64%

2%

Successor

Owner

All

Base: All with a succession plan answering 748 (owners 410, successors 300)

**

**

**

* *

* *

* = significant difference

16

Format of succession plan

Q Which of the following best describes your succession plan?

Written document / will, embedded in the business plan and shared

Informal understanding discussed with successor/s

Written document / will, not embedded within the business plan or shared

An assumption, not yet discussed with successor/s

Current owner's will but not yet discussed with successor/s

40%

37%

11%

7%

5%

40%

36%

9%

9%

6%

38%

42%

12%

5%

3%

Successor

Owner

All

Base: All with a succession plan answering 298 (owners 176, successors 98)

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How succession plan was developed

Q How was the succession plan developed?

Used professional services (solicitor, financial adviser, etc)

Family discussion - immediate family only

Family discussion - immediate family and spouses

On my own

Informal facilitator (such as friend or other farmer)

Paid-for facilitator

59%

44%

24%

8%

2%

0%

55%

41%

23%

13%

1%

1%

60%

54%

24%

2%

4%

0%

Successor

Owner

All

Base: All with a succession plan answering 298 (owners 176, successors 98)

**

**

* = significant difference

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Professional services used to develop succession plan

Q Which of the following professional services did you use?

Accountant

Solicitor

Tax specialist

Financial adviser

Agri-banker

Wealth manager

Insurance agent

Other

85%

81%

22%

9%

6%

4%

3%

11%

85%

81%

23%

11%

5%

5%

1%

11%

88%

81%

21%

7%

7%

2%

5%

14%

Successor

Owner

All

Base: All with a succession plan who used professional services answering 174 (owners 97, successors 57)

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Communication of the succession plan

Q Which of the following best describes how the plan has been communicated?

To family (including those who are not successor/s)

To successor/s only

To legal / financial advisor

To all farm employees informally, as well as successor/s & family

To no-one

To all farm employees through a formal announcement (e.g. announcement, party, etc)

49%

32%

8%

6%

4%

0%

51%

30%

9%

5%

5%

0%

41%

41%

7%

7%

3%

0%

Successor

Owner

All

Base: All with a succession plan answering 296 (owners 175, successors 97)

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Successor to the business

Q Which of the following best describes the successor/s to the business?

Eldest son

Shared amongst more than one sibling

Other son

Eldest child (irrelevant of gender)

Other daughter

I am selling up

Someone outside the business

Other

36%

31%

12%

8%

3%

2%

1%

7%

34%

35%

14%

5%

2%

2%

1%

7%

38%

24%

13%

16%

5%

0%

0%

4%

Successor

Owner

All

Base: All with a succession plan answering 287 (owners 168, successors 95)

**

* = significant difference

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Q How does the Succession Plan accommodate for the interests of family

members who will not succeed to the farm?

Base: All with a succession plan answering (252)

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Q How does the Succession Plan accommodate for the interests of family

members who will not succeed to the farm?

Base: All with a succession plan answering (252)

“They inherit parts of the farm, i.e. properties to equal value.” - Potential successor, 25-34, Female, 200-499 ha, South West“The succession plan appears to have ben changed recently influenced by a desire for "fairness" and rising land values.” - Potential successor, Male, 45-54, 100-199 ha, North East

“Other assets and cash.”Potential successor, Female, 35-44, 500+ ha, East Anglia

“Gifting of non farming assets.”- Owner, 55-64, Male, 200-499 ha, East Anglia

“It does not.”- Owner, 55-64, Male, 200-499 ha, Midlands

“No one to succeed so farm will likely close on retirement or death.”- Owner, 55-64, Male, 200-499 ha, South East

“Males have their own farm, females have investments.”- Owner, 65+, Female, 200-499 ha, Midlands

“Our younger son who wants to farm has become a full business partner, so will eventually inherit all the business once my wife and I die. He does not however own the land that my wife and I do (i.e. this is kept separate from the business. On death of the second of myself and wife, the land will be divided equally between our 2 sons, with the farming one having to pay a market rent to the non-farming older son, who, if he wants to sell the land, has to give our second son first refusal and a fair time (5 years or more) to raise the money; the value by independent valuation.”- Owner, 45-54, Male, 200-499 ha, South East

“It does not accommodate those not in the succession plan.” Potential successor, Male, 18-24, 20 – 99 ha, South West

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Important reasons for creating a succession plan

Q In your opinion, why is it important to create a succession plan?

Ensuring the future of the business

Tax efficiencies

Removing family tension by setting out a plan

Reassurance knowing everything is set in place

Fairness to all children

Older generations can enjoy their retirement

Best suited member of the family can take over the farm

I don't like my son / daughter's partner

Other

72%

62%

58%

58%

51%

37%

35%

2%

4%

64%

63%

51%

53%

52%

33%

33%

2%

5%

83%

61%

70%

64%

49%

45%

38%

2%

3%

Successor

Owner

All

* *

* *

Base: All with a succession plan answering 750 (owners 411 successors 300)

* *

* *

* = significant difference

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Important reasons for creating a succession plan – other comments

Q In your opinion, why is it important to create a succession plan?

Base: All with a succession plan answering 750 (owners 411 successors 300)

“My ex partner is a danger.”- Owner, 45-54, Male, 20-99 ha, North West

“You assume we want our children to work all hours for little reward, we don't.”- Owner, 55-64, Male, 20-99 ha, South East

“I want this small family to stick together & NOT fall out amongst themselves, so it is best they are all equally informed.”- Owner, 65+, Female, 20-99 ha, Yorkshire

“We do not (want) our children to go the farm and have to work as hard as we have had too and be as poor as we are.”- Owner, 55-64, Male, 500+ ha, South East

“Too much paper work for this job, we are growers hands on not accountants we aren't made for paper stuff to keep others in warm office.”- Owner, 45-54, Male, 20-99 ha, East Anglia

“So the younger gen know where they stand and can make their own plans.” - Potential successor, Male, 25-34, 100-199 ha, Midlands

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Challenges in creating a succession plan

Q And what are the challenges in creating a formal succession plan?

The conversation is difficult to have

The farming business can only support one successor

The owner does not want to retire

The owner does not want to discuss it

The owner can not afford to retire / live away from the farm

Family instability / conflict

Successor/s do not have the right skills / experience to take it on

Successor/s are not interested

Other

46%

33%

28%

24%

24%

18%

16%

12%

14%

32%

34%

29%

15%

26%

11%

18%

18%

16%

64%

34%

29%

36%

22%

27%

13%

4%

8%

Successor

Owner

All

Base: All with a succession plan answering 718 (owners 388, successors 293)

* *

* *

* *

**

* = significant difference

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Challenges in creating a succession plan – other commentsQ And what are the challenges in creating a formal succession plan?

Base: All with a succession plan answering 718 (owners 388, successors 293)

“Is it right to saddle my successor with the restrictive life style of farming.”- Owner, 45-54, Male, 100-199 ha, Midlands

“Pride.”- Owner, 45-54, Male, 200-499 ha, North West“Complications around the financial affairs of one of the successors.”- Owner, 55-64, Male, 200-499 ha, South West

“There needs to be incentive to want to get into farming apart from the hunger to farm. What percentage of people look at an industry which equates to hard work for little reward? We need to look at solution from different angle. Not necessarily to get successors to want to do job by pressure of loyalty to family but by reward. This way money can be made for both successor and existing farmer who may not want to move on as it's the only way of life they know but each can enjoy the benefits from their hard work.”- Owner, 35-44, Female, 20-99 ha, South East

“Will probably get out before this decision is set to be made because the business is not viable and assets far outweigh income from them. Costs have gone through the roof and returns do not match them.” - Potential successor, 55-64, Male, 100-199 ha, South West

“How to reflect unequal contributions to current business but stay fair to other sons and not force contributor to pay too much for the farm to make it viable.” - Potential successor, Male, 35-44, 20-99 ha, Wales

“It's the white elephant in the room and easier if it can be swept under the carpet until it is forced on you.” - Potential successor, Male, 25-34, 200-499 ha, South West

“It's never bought up, never thought about.” - Potential successor, Female, 18-24, 200-499 ha, Midlands

Background and Objectives

Methodology ExecutiveSummary

Respondent Profile

Main Findings

Summary of Findings

Succession Planning Research 2015

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Summary of findings

Respondents expect farms will be

handed on to the next generation within

7 – 9 years. Less than half of

respondents (40% overall) have a

succession plan in place. However, over

half (64%) of the sample believe ‘a lack

of succession planning is a threat to the

long-term future of their farm’. This

increases to three quarters (74%)

amongst successors. Elements deemed

to be important to be included in a

succession plan were most likely to be

named as ‘land’, ‘building & other farm

assets’ and ‘finance and loans’.

Of those with succession plans in place,

it is most likely to be ‘a written

document embedded within the business

plan’ or ‘an informal understanding

discussed with successors’. The plan was

most likely to have been developed

‘using professional services,’ followed by

having a ‘family discussion (immediate

family only)’.

Where professional services were used,

they were most likely to be accountants

or solicitors. Plans are most likely to

have been communicated to family &

successors only. The most mentioned

successors to the business were the

‘eldest son’, and ‘shared amongst more

than one sibling’.

The most important reasons for creating

a succession plan were ‘ensuring the

future of the business’, ‘tax efficiencies’

and ‘removing family tension’.

Successors were more likely to see the

benefits as being ‘ensuring the future of

the business’, ‘removing family tension’

and ‘reassurance’.

Challenges in creating a formal

succession plan were most likely to be

‘the conversation is difficult to have’,

‘the farming business can only support

one successor’ and ‘the owner does not

want to retire’

Appendix

Succession Planning Research 2015

Market structure How is the market structured? What will be the impact of future trends?

Buyer behaviour What factors drive purchasing decisions? What will people buy next and why?

Advertising effectiveness Is my marketing communications understood? What impact has it had?

Customer satisfaction Are customers satisfied with the service they receive?

Product & Company brand perception How does our brand perception compare with

competitors?

Product development What is the interest in our new ideas? Which ones should we adopt?

Web site development Who is using our site? What do they think of it? How could it be improved?

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What services does Reed Business Insight offerWe provide access to the agriculture market through independent research covering a variety

of different types of information requirements

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