[Introduction Music 0:00:06.0]
Amanda:
Welcome everyone to our final webinar in this series, number seven. My name’s Amanda Scott, I’m the Program Manager of Farming Together, and we’ve got Simone Blom who is facilitator extraordinaire for this evening. Now tonight our webinar series collectively is called Learning Together Collaborative Business Models and Structures, but tonight we’re particularly focused on succession planning. So this is Talking About Your Generation – Planning for Success in Succession. And we’ve got two very different succession planning stories tonight, and they’re both really fantastic and we’re very excited to have three presenters tonight talking about two different succession plans.
And we know all of them very well; our first presenters are Hugh and Katie Finlay from Harcourt Organics, who we’ve worked with now for many years. And we always love hearing from them and their story and having a good giggle along the way, and it looks like they’ve brought their fan club tonight as well so welcome everyone. And then we have Lorraine Gordon who’s our Strategic Projects Director at Southern Cross University, who’s also the Director of the Regenerative Agriculture Alliance and of Farming Together as well, so welcome Lorraine. Let’s not waste any more time, I’ll hand over to you, welcome, and we’re really looking forward to hearing your presentation.
Katie:
Thank you Amanda.
Hugh:
Thanks Amanda.
Katie:
Thank you so much for having us, it’s really an honour to be asked to come and speak about what we’ve been doing at the Harcourt Organic Farming Co-op. So we’re here tonight because as Simone and Amanda said the topic is succession, and the model we’ve set up at the Harcourt Organic Farming Co-op is both a succession model for us and a growth model for the next generation of farmers. It’s kind of the growth model for our farm but we’re not the ones doing the growth, and so it’s simultaneously trying to achieve those two very different goals. And as you’ll see there’s been some interesting challenges and things that we’ve learnt along the way. So do you want to start our slideshow?
Hugh:
Yeah, yep.
Katie:
Share our screen.
Hugh:
Oh okay. Alright yes, see if I can–
Katie:
You’re clever enough to do that–we’ve only got a few slides.
Hugh:
Yeah, there we go.
Katie:
Now we’ll just figure out how to drive it [Chuckles].
Hugh:
Now we immediately run into a problem, there we go.
Katie:
There we go. So the purpose of the co-op is to make the farmers as productive and profitable as possible, so it’s a plan for succession plus a plan for growth, so that’s just an overview of what it is that we’re trying to achieve. And then Hugh’s just going to start telling you a little bit about our background.
Hugh:
So we were Mt Alexander Fruit Gardens in Central Victoria in Harcourt just near Bendigo, we’d been farming, orcharding for about 20 years, and a certified organic orchard for about 12 of those. We weren’t getting any younger obviously as no one does, and I got to 60 basically, it was really what tipped us into deciding to have a look at where we were going and what we were doing, and we really needed a succession plan. We’ve got five kids, none of them are farmers, which is good and bad I guess but you know that’s what it is. We knew that we didn’t want to keep actively farming, at least not for too many more years. We also knew that we didn’t really want to leave the farm, the property, we’re very attached to it, it has a lot of sentimental attachment apart from anything, which is not necessarily a way to make a business decision but it’s certainly something that weighed into how we were thinking.
We’d had a lot of ups and downs over the years as you do in farming, I mean that’s just the nature of it, and we’d diversified the business, restructured a number of times, but the farmer’s still basically us, we were still the farmers and that’s what we wanted to change. So we considered selling, that was one of the options, but as I said we really didn’t want to leave, and so we started thinking about how we were going to not only be able to stay on the farm, but also maximise the productivity of the farm because there was a lot of potential. We’re on a 60 acre farm with only about 15 acres of that under our orchard production, the rest was really cow paddocks that weren’t being used, so there was a lot of potential there as well, so that was another thing to put into the mix.
So we really needed a succession plan, so we were approached initially by a couple of young women wanting to start a market garden, Gung Hoe Growers, they’re up in the very middle of the photo there, and so we leased an area of land to them, and we could see that that was a way that maybe if there’s one operation there maybe we could get more as well. So the Gung Hoe’s were with us for a couple of years, and then Tessa Sellar approached us and really we weren’t actively–I guess we were actively in our heads looking but we hadn’t really put it out there.
Katie:
We hadn’t really put it out there then, that’s Tessa on the left hand side there.
Hugh:
So that’s Tessa right on the left, she said this photo makes her look like a serial killer [Chuckles], she’s not, she’s great.
Katie:
[Chuckles] we love this photo. This photo was taken by Ollie [0:05:51.9] and we took some smiley photos and then we took a hillbilly one, and this is the one we use all the time we just love it.
Hugh:
Yeah, so that’s Tessa right on the left of the photo. So she had a dream to start a micro dairy, and our place was really ideal for her because one of the factors that was in her decision making she wasn’t in a position to buy land, but she also didn’t want to be isolated as a farmer on her own with no other peers or community around her. So this seemed ideal to her and it seemed ideal to us, so she approached us and we were starting to talk about how that might look, but that still left us with the orchard to run, which was obviously the main business of the farm. We then got to a point where we–so we were still a bit stuck, we were making progress but we were still the farmers, and that was really what we were trying to get away from in the physical sense. So it was at a meeting with our accountant, we were talking about what various options there might be and how we might think about things a bit differently, and she said ‘why don’t you lease it, why don’t you just stay there but lease the operation’, so the penny dropped for us I guess [Chuckles].
Katie:
It sounds completely obvious now but we hadn’t thought of it.
Hugh:
Yeah. So we then started putting out the call for expressions of interest, we found Ant, Ant Wilson who’s the second on the left there, a very passionate young man who had no orchard experience, but he knew he wanted to be a farmer. And for us one of the main pre-requisites for anyone that was going to take up an operation with us was that they really had to want to do it, it wasn’t just something to fill in a bit of time or something casual; they really had to want to do it. So he’s a very passionate young farmer, he wants to change the world, he wants to change the food system, which is great, it’s great to have radical young people and young minds and that sort of thinking. So it was great, so then we assembled our little crew together and then we had to work out what–
Katie:
We would do next.
Hugh:
Yeah.
Katie:
[Chuckles].
Hugh:
How we would all farm together, what sort of structure we would have, you know how it would all work really, how all the bits would fit together, so that was really sort of how we ended up where we are now.
Katie:
So the other person in that photo on the far right that’s my dad, and so he and I and one of my sisters run the fourth operation on the farm which is a fruit tree nursery. So we’ve got four completely separate farming operations on the farm. So that’s the team, do you want to go onto the next slide and I’ll just talk.
Hugh:
Yeah, sure.
Katie:
Alright, so that meant we had all the people in place, and then as Hugh said we had to figure out what the structure was actually going to be. We got Farming Together funding, so that’s why we’ve known and been working with Amanda for so long, the timing was great actually for us that co-ops were really the flavour of the month at the time, so we were really lucky to get that Farming Together funding. And that gave us access in the first instance to Claire Fountain who’s a fabulous consultant who is with us tonight, so hi Claire, and she guided us through pretty much the whole process from then on. And if it’s sounding like this was a linear process it totally wasn’t, it was much more of a non-linear pathway that went over here for a while and then over here for a while, but to try and tell the story we’ve made it sound a little bit more linear.
So we had Farming Together funding and we also had Regional Development Victoria, we’re in Central Victoria so we had some RDV funding to do the very first business plan. The Farming Together funding gave us access to a whole lot of consultants from October 2017 to April 2018, and that was fantastic. We had access to Claire who as I said guided the whole process, but we also had access to a co-op expert, a lawyer, a lease expert, and that gave us the opportunity to explore a whole lot of different potential ways that we might set this structure up, and it really started to build the community as well. So that was really excellent that we went through all of that together, so we not only did business planning for the whole community, for all of us, but each of the individual enterprises did some business planning for themselves and their own enterprises within that time as well.
That got us to the point where–I won’t explain the structure because Hugh will explain that in a minute, but it got us to the point where we were able to launch the co-op, had all the leases signed and everything, and launched the co-op on the 1st of June 2018, so that’s almost three years ago, so we’re almost at the end of our first three year period. So part of the reason that we decided to form the co-op on top of just having leases with all of the individuals, was we saw that that would be the place where we would come together as a group, and that’s where a lot of the potential benefit of being all on the same farm would come from. We were thinking in the first instance we would be doing co-branding, co-marketing, that we could save money by getting things like organic certification together as a group.
We thought we would be able to maybe get insurance all together as a group, and potentially lots of other things as well that we would be able to access as a group and do as a group. And to some extent we’ve done that and in other ways we haven’t done that, and that’s kind of where things get interesting [Chuckles]. So I’ll hand back over to Hugh and he can tell you a little bit more about the structure, how we’ve actually got things set up, because if you’re interested in doing this sort of thing that’s the first question people always ask is what’s the legal entity behind it so we’ll tell you that bit next.
Hugh:
Yeah, and I guess one of the initial challenges and one of the unique things about our co-op is that it is a collection of businesses not doing the same business. Whereas a co-op is generally you might have a fisherman’s co-op or a dairy co-op or whatever it might be, where you’ve got like businesses coming together for reasons of marketing or whatever. Whereas we had different types of businesses, the common thing being the property, and so that immediately put us in a different sort of game to what a normal co-op was, so we had to start really making things up, so we got–
Katie:
So maybe just explain this structure.
Hugh:
Yeah. So first we had to work out who was the entity that would–the people, the operations would have the lease with, and so we decided in the end that we as the landowners would have leases with the individual businesses, so there’s the four businesses there. We went into a lot of depth with the leases really; we started out thinking oh this doesn’t need to be a major thing. But in fact the more we looked into it the more we could see that there were things that really needed to be articulated in a lease, so that everyone was really clear about where they stood in relation to not only their relationship with us, but in their relationship with each other. And so in the end we presented all our young farmers with a 17 page draft lease.
Katie:
[Chuckles] they loved that.
Hugh:
And said ‘here you go, go and have a look’. And we really encouraged them to go and get legal advice and in fact we said ‘you’re mad if you don’t’, and to their credit I think they all did which was good. And so that began a period of backwards and forwards of–
Katie:
Negotiation.
Hugh:
Yeah there was some fairly robust negotiation I guess. But essentially there were no major surprises in there I don’t think for anyone, but it was really just seeing it all on paper everyone’s going oh okay, and so everyone really had to get their head around it.
Katie:
And for them because they’re all quite a lot younger it was very serious, it made it real for them, it made it really serious, they were signing up to a nine year lease. And because they had to go and get legal advice, they had to actually go through it and really understand that it was a legal document, and so I think that was a really good process.
Hugh:
Yeah it was. And we did have a lease template that we’d got through one of the–
Katie:
Through Farming Together.
Hugh:
Through one of the Farming Together consultants, and it was very comprehensive but it was quite legal and we really tried to put it into–
Katie:
A bit more plain English.
Hugh:
Yeah, real English rather than legal English. So I think we ended up with a document that’s a bit more friendly than strictly just a legal document. So then having got those leases in place or the agreements that we would sign them, it was then about well how do we all relate to each other and how does–
Katie:
And how do we work together.
Hugh:
Yeah how do we work together, and who says what happens and how does that happen. Because we were aware that as the landowners, we’re in an inherently stronger position from a negotiating point of view than any of these individual businesses, and so we wanted to try and level that so that everyone had a voice in what happened on the farm. Because we really wanted them to have the maximum buy in in terms of being committed to really being able to farm as they wanted to farm in a way they wanted to farm, not feeling like they were just–
Katie:
Being told what to do.
Hugh:
Yeah.
Katie:
Or didn’t have any power, yeah.
Hugh:
That’s right. So that was where the co-op came into it I guess.
Katie:
And that’s worked really well actually. So one of the things that’s under review at the moment is exactly what comes under the co-op and what doesn’t, what stays at the personal level, the lease level. And that picture is changing quite a bit at the moment, but nonetheless it’s been proved to be a really really useful spot so that everybody feels equally entitled to their point of view. So that aspect of the co-op I think has worked really well, even though there has been a bit of confusion about what the co-op is for, but it’s certainly created that thing of there being a very level playing field I think. Can you go onto the next one?
Hugh:
Yep. No that’s it.
Katie:
Oh that’s it. Okay so maybe I’ll just say a little bit more about the review that we are going through at the moment. So what we’ve actually done in the last three years is all the young farmers have set up a market together, through our local farmers market, they’ve set up a new weekly farmers market and that is now their main market. They have a shared stall at that market, the co-op employs a bookkeeper, and so whoever’s staffing the market gets paid proper legal wages through the co-op, and the bookkeeper manages all of that, and that’s been fantastic, that has all worked really well.
What we’ve found was there was a difference in understanding as time has gone on, is that some members of the co-op had more of an understanding that we would be doing more projects together I guess, really trying to collaborate on new stuff together, whereas other members have been much more thinking that what they really need to focus on is getting their businesses established. So they’re all still young businesses, and for some rather than others they’re really focused on that’s where their energy needs to go, and so the co-op has had to come after that for them.
And so what that has led to is that we’ve had a couple of really fantastic facilitated conversations, for people to talk about what value they actually want out of the co-op, what value it’s really giving them, and want they want out of the co-op. So it’s not like we’re about to throw the co-op out, nobody would even say it hasn’t worked, nothing like that, it’s just an appropriate point to review and redefine what it is. And it’s been very interesting that even though we did all that work at the beginning and we all thought we were on the same page completely, and we do all have shared values on lots of things, but actually there were a whole lot of different pages going on, and that was kind of leading to tension.
And soon as we had that conversation of going what do you actually want and giving everybody the chance to say that, it was like oh that’s why I tried to do this and it didn’t work and I got really annoyed with you we’ve all taken a step back again, and we haven’t finished that process, so we have to finish going through that of redefining what is it next. So our leases are in, we’re committed for nine years with each of our leases, but they are all committed for three years and then they have to opt in again for the next three years. And so Ant who is our orchard lease has let us know that he’s leaving at the end of his first three year term.
So not with any [0:20:33.0] it just has turned out that he was looking–the sorts of opportunities, the sorts of things that he wants to do, he thinks he’s got a better chance of creating those opportunities elsewhere. So he’s moving on but he has been fantastic, he really has just been such a great orchardist, and even though he’s got six months to go he was really keen to work with us on finding the next person, he really wants to be part of incubating the next orchardist that comes in. He I would say feels like it’s been a complete success for him in terms of what he’s learnt about how to grow fruit so that’s a success.
It’s also for us a bit okay now we need to start again with another young rookie orchardist, but I mean that’s what we do, we teach fruit growing as well. The fifth business that’s involved in a farm is called Grow Great Fruit but that’s our teaching business, that’s not land based and we don’t have a lease with ourselves, so it just doesn’t fit into this structure.
Hugh:
Is that us?
Katie:
I think that’s us, I think that’s us unless we’ve forgotten anything–
Hugh:
There we go.
Simone:
[Claps] amazing, thank you both; I’ll clap on behalf of everyone.
Hugh:
[Chuckles].
Simone:
I have got a few emoji little claps going on there too. So we’ve just opened the floor up for questions now, if anyone has a question they’d like to pop in the chat for Hugh and Katie, I’m facilitating a bit of Q&A.
Katie:
We’ll be honest.
Simone:
I get a sense about that with you guys which is very refreshing, it’s very lovely.
Amanda:
I’ve got a question while we’re waiting for questions to come in. Every time I hear your story I just learn more and more, and I am more and more inspired and in awe of this whole process that you’ve gone through, and just to be continually inspired and willing to look at things and work on things and work with people, I’m just in great admiration of what you guys are doing. One of the interesting questions that I have is you mentioned that you were at the moment going through the process of teasing out what was actually in the lease and what was actually in the co-op, and I’m just really interested if you could talk to a few of those examples? And maybe some of the things that surprised you or you kind of didn’t have a shared understanding around what’s that with the lease and what’s that with the co-op.
Katie:
I probably didn’t put that quite the right way actually, because the leases are quite specific. So the lease for example says that people have to be organically certified, but at the co-op level we have the certification jointly at the co-op, which was amazing that we got that. I think probably a better way of describing the review process that we’re going through at the moment is how far reaching the co-op would be. So for example one of the potential projects that came up that we could’ve done was building a commercial kitchen together. So we got funding from RDV to build some infrastructure, some shared infrastructure on the farm for everybody to use, and our intention, my intention when we got that funding, because it just seemed like a no-brainer to me, that a shared commercial kitchen would be really useful for all of us even if none of our tenants used it.
We could lease it out to somebody else and make income for the co-op, but it turned out that we didn’t go ahead with that project, because the co-op members who don’t need a commercial kitchen, it just seemed like putting their time and managing in the wrong direction. And it took us a while for everybody to be able to say–it was a very important part of our learning, that when any new idea comes up like that that we have to go through the decision making process slowly enough, that people just didn’t get caught up in other people’s enthusiasm, and not being able to say no because it seemed like a really good idea and that sort of thing. And so these days we go much slower through those sorts of decisions about new projects, and people really get the chance to reflect on them.
Because what emerged, they just didn’t want to put their energy into it and they didn’t want to say that, some people didn’t want to say that because other co-op members like me were really enthusiastic about it. So it was hard to go through that one, but it was a really really good learning experience, that just because the co-op could do things that would expand the co-op in certain ways, it just didn’t fit other people’s ideas of what the co-op should be. So that’s really more where the current review is, it’s like okay so what should the co-op be, what actually do we want or want it to be and where are those areas in common. So everybody agrees for example that from a forward facing point of view we want our customers to be able to see that we all share the land, and we all are a community together all growing food on the same land.
And so we’re called the Harcourt Organic Farming Co-op, everybody is pretty clear about that, and we’re really clear about land use, our land use values.
Hugh:
Yeah, yeah. And everyone is really together on that, so I feel that that’s very non contentious and one of the clear things. I think one thing we could’ve possibly done different in the first three years is to have an end of season review at the end of each season, to really sit down and say ‘how’s the season been for everyone’. Because I think it’s so easy to get caught up in your own business and just be forging ahead, you’re always busy and you’ve always got an endless list of things to do, as anyone who has been in a small business knows, there’s never enough time. But I think it would’ve been really valuable for us to make that time at the end of each season to say how was it, what worked about the co-op, what do we need to look at to tweak or adjust or what have you, and I think that would have been a valuable thing to do. We’ve now got to two and a half years in and we’re having that process, we missed a couple of boats along the way I think [Chuckles], so yes that would’ve been handy.
Simone:
Amazing, thank you. We’ve got a few in the chat now so I might just ask a couple and we’ll have to move onto our next presentation, we might come back to them at the end. I’ve got a quick one from Leo; will the document be made available as a sample for others wanting to do similar?
Katie:
Well yes. So there’s not one document, so I presume Leo’s talking about the lease, yeah there’s actually loads of other documents that we went through along the way as well. I’m in the process and have been for a while, but I will get around to it soon of bringing all of that together, and basically we have to depersonalise everything. But yeah we’re very happy to provide the drafts or templates for everything that we’ve done, it’s in process. And Farming Together are helping us with creating some of those resources Leo, so just stay on their mailing list [Chuckles].
Simone:
Stay tuned [Chuckles].
Katie:
Stay tuned.
Simone:
He said that’d be great thank you, and a great presentation. Bethany said thanks Hugh and Katie; do you think they’ll be another shift in agreements in your relationships with existing co-op members as a new orchardist comes in? Particularly as the agreements have a focus on the relationships between other members.
Katie:
Yeah great question. So we’ve been open to having other new co-op members the whole way. So fairly early on we did create a process for how people would be brought in, because we’re very conscious that we’re a very small community in a very small space, and so we have a no dickheads rule, but also people are able to get on well with each other. So we have got a process that whoever is shortlisted as the new orchardist will have to go through and meet everybody, have a meal together, we’ll provide lots of opportunities for the new person or people to get to know all the existing community members. And then they all get a say in whether–like we’re the ones that will be offering the lease, but we would not offer a lease to somebody if somebody else that was already in the co-op had a strong aversion to. So we’ve got a system already set up, we haven’t tested it yet, but we have thought about it and we’ve got it set up for how we do that.
Hugh:
Yeah. And so in terms of there being a shift in agreements, I think the agreements are solid, and it’s really about everyone really being open and upfront about where they are and where they think that they are within the co-op. And so it was more the unwritten stuff I think that led to misunderstandings.
Katie:
Yeah. Does that answer that question?
Simone:
Fantastic, yeah that’s great. We do have a couple more but I’m just wary of time, so we might move on to our next speaker now, and then if there’s time we’ll come back at the end and ask the following too. But thank you so much Hugh and Katie, obviously a lot of interest in what you’re both doing.
Amanda:
Yeah definitely, thank you I’ve got whole pages of amazing learnings of notes from that, so thank you very much.
Hugh:
Great.
Katie:
That’s our pleasure.
Amanda:
And no doubt we’ll be able to circle back to some of those questions. And if for some reason we don’t get a chance to address the questions tonight we can make sure that we do get an opportunity to–
Katie:
We can provide written answers to any of those as well, including that one from you Anne Marie about the certification, happy to let you know how that works.
Amanda:
Thank you very much. And now I’d love to hand over to our Director of Strategic Projects Lorraine Gordon, who has another succession planning story but a very different one to bring you tonight. So welcome Lorraine, thanks so much for joining us in this final and very special webinar session tonight, I’ll hand over to you.
Lorraine:
Thanks Amanda, thanks Simone. And Hugh and Katie I’ve got to say I have heard you speak a few times now, and I thank you for your support for what we do. But every time I’m just inspired and think how can I make that happen on my farm, so well done, well done. I’m just going to share my screen because tonight I’m not going to talk about anything to do with what I normally talk about, which is usually regen and Ag and carbon and farming together stuff. I’m going to talk at quite a really personal level about my experience with succession planning in our family, and I’m happy to be quite open about how that’s gone. So I’ll just share my screen with everyone, how’s that Amanda, can everyone see that okay?
Amanda:
Yep.
Simone:
Yep it looks great Lorraine.
Lorraine:
Lovely. So this is me and my boys, so I have three sons, Ethan, Seth and Huntley. So Ethan’s now 25 which is the one on the left, and Seth is my middle boy who’s 23, and Huntley is my youngest who’s 16, and that’s me on my weekends I guess you could say. This is the country; this is my playground, beautiful country. So basically I’m located up in the New England Tablelands at a place called Ebor, and it’s also called the New England Snowy. And so my farm is called Moffat Falls, and just a little bit of background about what we do there it is a cattle fattening operation. I also refer to myself as a carbon farmer, so I have thrown myself in boots and all into the carbon farming game or space I guess you could say, and I’m actually looking to make my first carbon trade in three years’ time.
So I normally buy steers in at around 250 kilos and sell them within eight to 12 months around 450 to 600 kilos aiming for the MSA grass fed market. I’m 1,500 metres above sea level which makes us the highest cattle farming operation in the country, and in whatever a normal season ever did look like, it used to be around 2000 mLs of rain per annum on some pretty rich red basalt country. Our temperatures can range from minus -10 to 27, so we’re mostly cold; we’re never really that hot where we are. And so we have our steer fattening operation, we turn off around about 1,000 steers per annum on both mixed pastures and improved pastures.
The carbon farming, I can talk a little bit about what we’re doing around carbon farming, I don’t want to go too much into that, but it’s basically all about for us increasing stock density, applying mineral applications, multispecies pasture cropping and composting. We also have quite a large tourism operation operating not only on the farm but adjacent to the farm. So we have an eco-tourism function facility and that houses about 55 people with a licenced restaurant, and from there we run all sorts of things from wellbeing retreats to team building, corporate retreats, weddings and all sorts of stuff, including regenerative agricultural education. We also have cottages and cabins, and we do guided fly fishing out of those cabins and out of our accommodation, and that’s guided fly fishing for rainbow trout.
So it has a number of enterprises, not enough if you ask me, I’d like a lot more enterprises, but enough to keep us all pretty busy. Now to turn what is a normally happy story into one more along the lines of devastation which was November 2019, we were smashed by the Ebor fires, and not one fire actually but two. We had one end of our property got hit by the Ebor fires, and the other end got hit by the east Cattai fire coming up from the coast. And all my staff and my family found ourselves bunkered down at the trout hatchery which is in between the tourism operation and the farming operation. So we are slowly coming back from that, regenerating as they say, but there are a lot of areas of our bushland that I don’t think will recover, and we were left with approximately $900,000 dollars’ worth of damage, including about 20 kilometres of boundary fencing which we’re still not on top of.
So we’re often having to find our steers in the nearby State Forest and New England National Park which is always fun. So resilience is something that I am continuously learning about I guess you could say. So just before I go into how we dealt with succession I think I’ll go back to this slide, which is really about a holistic approach to challenges. Because I’m a regenerative farmer, and because I’m into this whole concept of holism, I deal with problems in a holistic manner, and I include the problem of succession planning as one of the biggest. Because even in my own research, which has been looking at the different grazing systems from a triple bottom-line looking at the economics, return at the farm gate, as well as environmental aspects and social aspects, when I ask farmers what keeps them awake at night they always say to me somewhere in their top three list is succession planning.
And it doesn’t surprise me because we’re all so busy doing, that often the most important thing to do which I believe is succession planning, we just never get to. It’s on our list that’s something we know we’ve got to do, but we actually never quite get there, and often it’s at the detriment of our relationships and often it’s all too late, so that’s one of the messages that I’d hope to get through tonight. So a holistic decision making approach is really about having that statement of purpose, what are you all about, really addressing quality of life for all the members of the family. And when I say quality of life, coming up for the family with a quality of life statement including the economics, the economic wellbeing of the family, relationships, challenge and growth, the family’s purpose, the individual’s contribution to the family and to the assets of the family.
And then also looking at the future resource base, so what are your resources, and of course you can always talk about the environmental resources such as your water cycle, mineral cycle, and your environment and community dynamics. But you’ve also got financial assets sitting there and you’ve got human assets such as people that can contribute to the whole picture, so vitally important. So how did I deal with succession, basically what my now ex-husband and I did a number of years ago, was we actually locked ourselves and our three children in our conference room at our function centre all day, with plenty to eat and plenty of water, locked the doors and said ‘right we’re not leaving until we sort this’.
And at the time my youngest was 13 years old, so this is now three years ago, so he was 13, and the oldest was 22. And I had a will and there’s really basically three different parts to the property with different property names and different portions, and I thought well three sons, the three properties which adjoin with their different portions, it’s really simple we’ll just do it that way. But of course my husband at the time alluded to the fact that at this point the oldest was two million dollars better off than the youngest, and that the middle boy was at least half of what the youngest was getting, based on the specific area when he’d done six Google Maps and what the land per hectare was worth.
And of course the three of them who are extremely close ended up in a huge ruffle on the floor, and the youngest said ‘oh well this is all too hard, I want to go and fly my new drone that I got for Christmas’, and ‘can you let me out so I can fly the drone’, and ‘hey bros just make sure mum and dad don’t rip me off’ [Chuckles]. So I thought well this is going to be a really long day, but anyway the bottom-line is we sat down with them, we pulled up six maps, and we ditched all of the boundary and all of the existing portions and we actually looked at the property. And what I’m talking about right now is we’re just looking at the actual landscape and the actual real estate assets of the property, which is a really important point.
And we fairly divided that property into three on paper, so that’s the first thing we did, so at least in a real estate basis each of the three sons had the same area of land. So what I want to get to now though is that I’m the keenest farmer of the lot, so these three sons of mine are all involved with farming, well involved with the farm, but none of them are probably as enthusiastic about farming as their mother, and they recognise this although they all love the farm. So I think it was really important to split the real estate being the farm from the actual business itself, so split the farm assets from the business assets. So for the last 35 years I’ve been running this company called Moffat Falls on that farm, and this company called Moffat Falls has its own assets in its own right, such as cattle and equipment and tractors and Utes and god knows what else, and everything gets operated through that company.
Right now I am the sole Director of that company, and what we did back then was split the real estate, so that down the track if one of these boys wants to get on with their life and do something else and not be involved with the farm it’s their right to be able to do that. And then they can sell their portion of the farm and one of their brothers would have–well their brothers would have the first option to buy that portion. From my perspective I would never sell, so it was very easy for me just to say ‘look I’m happy to continue running the company whilst you all go off and do your thing and experience life’. And in saying that I’ve got my oldest son who’s an academic and aiming right now to be one of the academics visiting mars, to solve how we’re going to live on another planet if we bugger up planet earth, so he’s got his sights on some pretty big things.
My middle son Seth is an Assistant Manager at one of Norco’s retail stores, and loves all things dealing with people and retail. And of course my youngest is still in boarding school and we’re yet to know where he might end up, but at this stage it looks like he wants to be a builder or a carpenter, but mother still loves farming and the boys are all involved with it. So in our case I have a lease over the property and that’s to really protect my interests, but at any time if any of my sons want to come in and say ‘mum I want to be a full time farmer’ I can very easily get out of that lease and just say ‘that’s fine’ I’m happy to hand over that lease to one of the sons. In saying that the company has always made sure they could employ a full time Farm Manger, and that’s really important.
Because that’s what we do now, and the three boys could easily run this company together as three brothers, always being able to employ an independent Farm Manager, or if one of the brothers wanted to farm then they would allow that brother to farm and he would get paid a wage, plus of course his dividends from leasing his part of the farm. So I guess the message here is you really–and this is where I see so many farming families really get in a mess, is that they don’t separate the real estate assets from the company assets, and there are so many options available to us and we’ve talked a little bit about leasing tonight. In my case that’s the way I have gone, I’ve got five by five year leases, and like I said at any stage I’m quite happy to hand over those leases to a son that would want to be a full time farmer or even a part time farmer.
But of course there’s other ways you can do it, you can do it through share farming and you can even do it through agistment options, but I do believe that you do need to have a company and then the assets looked at, the real estate assets looked at differently. So the other important message that I do want to share with everyone is that we did it early, and I know not everyone’s in this position, but we did it early before partners got involved. Because one of the other things I tend to see in succession with farming families around the country is that everyone got along until the son or the daughter got married, until they wanted to come back and farm as well on the farm, and then you’ve got the son-in-law or the daughter-in-law starting to come into the picture.
So if it had of been in my case, instead of me dealing with three children I’m dealing with six, which doubles the complexities of everything, so they’re the three things that I would definitely stipulate. The brothers have chosen to basically always run a company to combine their areas of land, at this point in time they are all involved in one way or another, they’re just not fully involved as full time farmers but in the future they would be. Because they all get on very comfortable as Directors of a company employing the Farm Manager on their behalf, to pool what could end up three different portions of land owned by three sons, pool them together to create economies at scale and make it far more economical for them.
So that’s basically us in a nutshell, and that’s just a beautiful photo that I love. And the fact that I have three sons and I don’t have any girls, I just wanted to make sure that when you are looking at these things don’t forget the daughters, because I still see succession going very wrong when they don’t think that the daughters have a right to be involved with the discussions, or be able to secure in their future some part of that farm. And in closing my sons will be fourth generation farmers, I’m a third generation farmer, and at this stage yes it’s all going well. But I’d be really happy to open up to questions, any potential hurdles in the future that others might see from the way that we’ve done our succession planning, so I’ll stop sharing now.
Amanda:
Thank you, thank you so much Lorraine. And don’t worry for the daughters that you don’t have in your family; you definitely make up for the women that you work with in Faring Together because we’re all women [Chuckles].
Lorraine:
Yeah my adopted daughters, you’re looking at both of them [Chuckles], the awesome Farming Together team.
Amanda:
So thank you, thanks so much Lorraine, I don’t know about anyone else, but I just really love that you’ve created a lot of flexibility for your sons in the way that they do or don’t have to be involved in the farm. And the different ways that they could be involved, but regardless that their futures are financially set up in whatever way they choose to move forward in that, and I think it’s a really smart model. And I’ll hand across to Simone and open up for questions.
Simone:
Yeah thanks Lorraine that was really fascinating, and like you said very personal in hearing that side that you don’t often share with anyone, let alone everyone.
Lorraine:
Let alone a bunch of strangers on the internet. No we’re in all this together, didn’t somebody say that [Chuckles].
Simone:
Absolutely. So if anyone has any questions for Lorraine, we’ve got one that just came up now from Claire. Thanks Lorraine, is the land given to your sons now or only in your will? And she’s just got a secondary part to that, and what is the plan for the business succession in terms of ownership?
Lorraine:
That’s a really–yeah well I’ll just answer the first one then, you can ask me the second one again because it’s late in the day and boy what a day I’ve had. So in actual fact I should’ve mentioned this, the farm belonged to my mother, and my mother’s 82 and she wanted to hand the farm over to me. And I actually said–and mostly because of capital gains ramifications, I actually said to her ‘no I don’t think that’s a good idea, what I’d rather you do is to put it in Trust and hand it to the boys’. I would never realise the value of it or sell it because I’m so connected to country, I’m so connected to that land that it would just rip my soul out to leave that. So I thought it’s best that it bypasses me altogether, because as you know with intergenerational farm transfers you can only do it once, or if you didn’t know that you do need to know that, you can only transfer a farm once to the next generation.
So what that would’ve meant when I passed away was that my boys would’ve been left with massive capital gains issues, so in this case they won’t be but of course their kids would be, and so I bypassed the whole set up. So at the moment it’s in a Trust that my mother set up, who like I said is 82, and when she passes it will go to the boys. But the lease over it of which is in my name, gives me a little bit of say that I can keep farming, but like I said if one of them came back and said ‘mum can you just get the hell out of there and let us do this’ then I’d go ‘sure no worries, that’s fine, I’ll just come up there for holidays and complain about all the things you’re doing wrong but I won’t get in your way’ [Chuckles]. But I can’t see that happening–and sorry what was the second part of the question Simone?
Simone:
And what is the plan for the business succession in terms of ownership?
Lorraine:
Oh okay, sure. So basically at this point the two older sons have been invited to come in as Directors into the company, but the oldest said ‘yeah look if you need me to be a Director mum I’m happy to be a Director’. The middle one doesn’t much care, and in actual fact in all the decisions I make up there we have monthly meetings, I treat them as Directors anyway. If they wanted to be they could, but they think that mum’s still got a bit of debt so it might be better that they’re not. And so we have monthly meetings and we discuss all things to do with the company and the farm so everything’s very open, but yes the company if something happens to me the company goes to the three boys, so it automatically happens.
Simone:
Excellent. I’ve got a question from Hugh and Katie, I’m not sure who posted this one, but is the arrangement about you handing over the lease formalised in writing or just verbal?
Lorraine:
Oh absolutely, registered lease and all done with the solicitor, yeah absolutely, no it’s not verbal at all. It is a proper lease with proper lease conditions and clauses, where the lease can give notice and say look I’m done, or if I do the wrong thing same thing, they have a case to be able to say that I’m not doing things in accordance with the lease.
Simone:
Excellent, thank you. And we’ve got one from Bethany, a big thank you Lorraine, you mentioned your day discussing with your family, under what circumstances would you suggest outside facilitators?
Lorraine:
Definitely if there’s a little bit of controversy hanging around or if they don’t get on, in my case my kids get on very well. If you’ve got any sort of controversy or you’ve got children that don’t necessarily get along that well, or if you’ve got daughters or son-in-law’s or their partners that are feeling a little bit jaded and there’s Chinese whispers floating around, I think any sense of a problem or trouble I would certainly bring in a facilitator. What I’d also do is make sure if you did bring in a facilitator that they independently met with every member of the family prior to bringing everyone together, so they were well informed and very capable. Because you’re really handing your heart to them, and you’d want to make sure you got the best to be able to do that I must say, because if you don’t get this right you can have horrendous outcomes for relationships down the track.
Simone:
Yep. And I’ve got one from Fiona, thank you for sharing, on the debt side what security is the bank using?
Lorraine:
Well in actual fact there’s no debt on the farm at all, there is a bit of debt on the function centre, so my company has a bit of debt in some of its other activities. So the boys at this point will inherit at some stage a farm that is debt free, but that’s why they–I thought well what is the point of them coming into the company when the company has some debt in it, there’s no point. If something happens to me they’ll take care of the company then, it’s not that it’s a lot, but still there was no benefit in them being official Directors of this company at this point in time. And that was discussed very openly with a solicitor, in case I get rolled by a bus or hit by a bus do I need another son or two to be Co-Directors and there was no need.
Simone:
Yep, it’s amazing to hear even more. We’ve got a couple of more questions, so you’ve got a large age difference between the boys, how have you handled that? Do you look out for your youngest interests more?
Lorraine:
No I’m extremely economically fair I must say in all of these things. I’m very lucky the oldest son is also a very ethical boy and they are very close, and so he would look after his bros as he calls them. So I think it’s always done with the solicitor sitting there, and I think even though you can’t always hand them equal quality of land–so for instance in this case we had to actually get a valuer in. So there’s a lot of bits I’m now remembering we had to do, because some parts of the farm had more physical assets on them than others, such as houses and cottages and yards and cabins and all of that. We actually got a valuer to come in and value the built assets on that farm, so we valued the built assets, and then we adjusted the land area according to the assets at that time.
And so the middle part of the property was where all the assets were and probably had the best land, so therefore the oldest son did get that section, but a little bit lesser land, whereas the other two brothers got slightly more land because they didn’t have the same amount of physical assets on their country. So when we have our monthly meetings as a company the other thing we do is document any new assets that are being built on that farm, they will be taken into account down the track. So we had to draw a line in the sand at the time to be able to draw up where the potential boundaries might go, but in the future of course we’re constantly building new assets, we’re updating cabins or building new cabins or a new set of yards or whatever it might be, that is well documented and that will be taken into account down the track.
So what the company will try and do for instance is if there’s been an asset built on one section, then that means it’s almost like there’s some money in the company there to build an equal value asset down the track on another sons section. So economically it is so fair, and economically I believe it has to be absolutely fair across the board as much as you possibly can do that.
Simone:
Yeah it sounds like a smart way to go.
Lorraine:
Avoids arguments.
Simone:
Yeah exactly, yeah the sibling rivalry game, absolutely. Look there are a couple of more questions but I’m very aware of time as well and I–
Amanda:
You know what I’m thinking Simone, I think we might have to write some fact sheets up on this, because obviously there’s so many questions coming through and I think a lot of people want to know about this sort of thing and will be asking a lot of the same questions. So I think that you might see some fact sheets coming out from us around these two fantastic presentations tonight. And I’m not sure if we’ll get a chance, we’ll also try and address these questions for the participants that are here.
Simone:
Yeah I was going to say if you’ve got any extra questions you can email us at [email protected], and we are happy to follow up of course with questions that you might have. And Katie and Hugh are giving us the thumbs up to do that as well, which is great because I did just say it already [Chuckles]. We do want to thank everyone though, they’ve just been such interesting brilliant questions that have come through, and I know Anne Marie you’ve put a few comments in there thanking everyone as well for the informative and honest presentations this evening. Angela said the same, two great presentations, very interesting, thanks so much. So it’s definitely a very needed topic to be talking about, and we thank you all for agreeing to come along so close to Christmas as well.
Amanda:
And also again just the real appreciation that’s already been reiterated through the comments about the honesty around this, because unless you have that honesty you don’t get to hear about the nitty gritty bits that are really important, and fundamentally underpin the success or not of succession planning. So we really appreciate the openness of our guests as well and the real questions from our audience. And look that’s all from us for this season, what a great time of year to end as we move in towards Christmas. A big thank you to Lorraine and Hugh and Katie for probably one of my favourite webinars of the season, and thanks again to the guests, we will make this webinar available on the website and we’ll email it out to you. Let me know if I forget to say anything Simone, but I just wanted to add one last comment before I hand over to Simone. And that’s if you’ve really enjoyed these webinars whether it’s this one or you’ve been to some of our others as well, you can check them out on our website; let us know, because if we get enough interest we’d love to do another series. If you did love it let us know and also tell us about any topics that you would be interested in us presenting on in another season. So I hope you all have a really fantastic Christmas, thanks for being such a great audience and presenters, and oh look here’s one we prepared earlier Simone [Chuckles]. And thanks so much to Simone also for being such a fantastic colleague in helping bring this all together, we’ve just had such a great time and we look forward to seeing you in 2021.
Simone:
Thanks everyone.
Amanda:
Merry Christmas everyone.
Simone:
Good night everyone.
Amanda:
Good night.
[End of Webinar]
