The soon to be published ifac Irish Farm Report 2020 will reveal that 90% of Irish farmers don’t have a definitive farm succession plan.
The succession problem was also clear in ifac’s 2019 report, resulting in the professional services firm (which is Ireland’s ninth-largest accountancy firm) focusing on growing their succession advisory team.
ifac has helped many farm families to get succession right, including the Powers of Ballymullala in West Waterford. Their case study is described here.
Every family farm business needs to have a succession plan to protect the future wellbeing of those involved, deliver financial benefits for the successor, and to help secure the future of Irish farming.
One successful farming family who tackled succession early on and is now enjoying the benefits of their three-way partnership are James, Brid and Tom Power.
The Powers milk 290 cows and supply their award-winning milk to Glanbia.
James and Brid Power
James and Brid Power are fifth-generation dairy and beef farmers from Ballymullala in West Waterford.
At the age of 14, the norm at the time for intended successors, James stayed at home to work on the family farm with his parents, Joe and Bea.
When James entered his 50s, the family decided to look to the next generation, and their son, Tom, as their successor to help develop the business.
Tom is one of five children.
Married to Moya with four kids under six (Ella, Chloe, Aoife and JJ), he is also a multiple award-winning dairy farmer.
“I grew up watching my parents on the farm and that’s how I got interested in it. There’s a history of family involvement for generations, and I just fell into the same routine,” he said.
After he finished school, Tom went to Rockwell Agriculture College, followed by a year’s placement in New Zealand. When he returned, he began working on the farm. His parents transferred part of the 139-hectare farm to him a few years later, in 2001, when Tom was still in his early 20s.
“My parents were ahead of their time. Usually parents hold onto the farm until their successor is well into their 40s but in my case, I was quite young. I knew how hard they worked for everything they had, and for them to turn around and hand part of the farm to me was a huge boost for my confidence.”
In his early 30s, Tom married Moya and the rest of the farm was transferred to him. Since then, he has worked together with his parents every day.
As the business has grown, they have acquired some part-time help. Tom’s cousin, Shane Flavin works part-time and their neighbour, Maurice Reynolds helps with relief milking.
“Dad is a fountain of knowledge. He is well-travelled, open to different points of view and discussing ideas, and he has always made it easy for me to work with him,” said Tom.
James and Tom have the same work ethic. They have similar points of view and they like to do things the same way.
They have a fairly broad range of skills between them, says Tom.
“I have a keen interest in dairy breeding and grassland management, optimising the quality grass for our cows and drystock too.”
Today, there are three generations on the farm.
“Having family back up is hugely important to the success of the farm.
“My wife Moya has been an incredible support to me and has made sacrifices in her own career for our family.
“We are lucky that she is in the position to work part-time from home now, which has been a huge help to us,” said Tom.
Benefits of partnership
One of the biggest decisions the Power family undertook early on was moving to a three-way partnership structure.
Over seven years ago, after examining their financial structure with their ifac advisor (Eoghan Drea, partner at ifac Dungarvan) and discovering that they were paying a high level of tax every year, they moved to a company structure.
“We did this because my parents were moving towards an age where putting a lot of money into a pension wasn’t that attractive, as a means of reducing our tax burden.
“We were at the stage where it just made sense, because we didn’t have a huge wage bill, it was all own labour.
“We were milking a decent number of cows, and had a good single-farm payment. We didn’t have any massive capital allowances, because we hadn’t done much building at the time,” said Tom.
Moving to a company structure has enabled them to improve the infrastructure on the farm and increase their land base.
Over the past four years, they have been able to invest in a cubicle shed and a new milking parlour, and most recently they have been able to buy 35 acres of land straight across the road from their farm.
Regardless of your company structure, Tom believes that if you’re farming, the thing that will give you the greatest pleasure is knowing that you have identified a successor, the next generation who will drive on the business into the future.
Another advantage of putting the succession in place early is that all parties derive satisfaction from the continual improvements to the workings and general appearance of the farm, whether it’s adding a piece of land or to the size of the herd, as well as the day-to-day enhancements like improving roadways.
What is Tom’s advice to other farmers looking into succession?
His one piece of advice is to have the discussion early.
If you have someone in mind — a son, daughter, niece, or nephew — he advises to do it sooner than later.
He says waiting until they are in the 40s or even 50s is too late.
“The combination of all our energies and ambitions have helped us to develop the farm to where it is today.
“If they were only at the point of handing the farm over to me now, when I’m in my early 40s, I wonder if I would have the same drive that I’ve had over the last 20 years to push it on,” he said.
Additionally, Tom advises others to put their trust in their professional financial advisory partner.
“We wouldn’t be in our stage of growth without the advice and support from our ifac advisor. They are the people with the ability and qualifications to do what you’re paying them to do.”
Ifac has worked in partnership with the Power family for over 30 years and across two generations.