When it comes time to pass down a family agribusiness to the following generation, there are many financial and personal considerations to take into account. There are personal choices that have a significant impact on one’s finances which is the most challenging of all!

It’s not uncommon for a family farm to have to provide for at least 2 generations of owners over the course of many years. For this endeavor to be successful, smart financial planning is required. Even in the best of circumstances, letting go can be a challenging task. However, the process can become significantly more nerve-wracking if the retiring manager is financially reliant on the company.

Sadly, when it comes to the planning of ownership transition and succession, numerous family businesses only concentrate on reducing the number of transfer duties. The financial stability of the older generation following the transition is something that is frequently forgotten about or poorly planned for. The process of transition should start with the current owner laying out a detailed plan for his or her life after the company has been handed down to the next generation and having a conversation with that generation about it.

The next generation should then decide whether or not they are ready and able to assume the duties of ownership and/or management of the company, and everyone else should consider whether or not the next generation is capable of doing so. The process of transition typically includes programs that educate and start preparing the next generation for the responsibilities they will inherit in the future; this aspect will also need to be taken into consideration.

In the event that the subsequent generation is unable or unwilling to take over the future ownership of the company, the high-ranking owner must determine whether to sell the business to a third party or continue to be actively involved in the business.


The planning of the transition includes the family as well as the company, and as a result, there must be choices made on both a financial and a personal level. The most difficult choices to make are frequently those that are personal, such as those concerning the provision of financial security for older generations.

Once monetary goals have been established, it is possible to seek advice from tax and legal experts to devise the strategies and action plans that will be most successful in achieving those goals. The older generation and the younger generation are both impacted by the financial repercussions of a transition. All too frequently, the generation that is on the receiving side of a wealth transfer does not adequately protect their wealth by engaging in proper financial and estate planning. The planning process ought to include contributions from every owner.

When developing a strategy for the next generation of leadership, it is important to ask the following critical questions:

  • What is the personal vision that those of the senior generation have for their lifetime?
  • What level of income will be necessary for the senior generation to maintain a satisfactory lifestyle?
  • How much money will need to be invested in order to bring in the required amount of money (after taxes) to maintain that lifestyle?
  • In what proportion does the senior generation currently hold such assets that are invested in areas that are not related to the business?
  • To what extent must the senior generation rely on future income from the business if there are insufficient assets available outside of the business?
  • How much of the senior generation’s retirement income can they continue to receive from the company even after they retire?
  • Will these income provisions make it more difficult for the company to pursue future financial opportunities?
  • Is the subsequent generation both ready and able to take over ownership of the company as well as management responsibilities?
  • If the current generation is not capable, what kinds of resources and how much time will be necessary for the subsequent generation to become capable?
  • If the next generation does not wish to continue the family business, would the money made from selling it to a third party be enough to provide for the requirements of the family for the rest of their lives?
  • If the company is going to be passed down from one generation to the next, have the proper policies and agreements been put into place to facilitate the transition?
  • Is there an adequate capital framework in place that will allow for an effective transfer?
  • What are the transitioning goals for each class of shares, given that there are voting (preference) shares and non-voting shares already in place?
  • How should the ownership of voting (preference) shares and non-voting shares be divided up between siblings?
  • In the long term, how will the responsibility and management of the company be made accountable to the shareholders?
  • Will there be any participation from independent directors or advisors in the governance process?

Marketing One’s Assets to the Coming Generation

In the event that the older generation does not have adequate capital assets to fulfill their requirements during retirement, it may be prudent for them to sell all or part of those assets to the younger generation. However, in many instances, there is not enough cash flow for the next generation to be able to purchase shares in the company. After that, the company itself becomes the primary source of funding to complete the transition.

When the owners of a company are planning to rely on the firm to finance a transition strategy, they should take extra precautions to ensure that the company will remain in good financial health.

A pension or postponed compensation system could be established by the company before the senior generation retires to provide a source of income for that generation. Additionally, it may be able to provide ongoing benefits in the medical field. There is a wide variety of options available to accommodate the needs and goals associated with the transition.

When determining a suitable strategy, it is important to take into account not only the senior generation’s desire for financial autonomy but also the abilities of the generation that will succeed them as well as the financial health of the company. Establishing governance policies and putting shareholder agreements in place to govern future ownership is an essential step that must be taken before shares can be transferred.

As a necessary step in the process of changing ownership, the shareholders in the company need to reach a consensus on any ownership restrictions that are in place as well as a buy-sell agreement that is viable. It is also important to determine the required levels of majority for making significant decisions, such as whether or not to sell the company or put it up for liquidation.

Financing Retirement


No matter what conclusion is reached with regard to the company, it is necessary to formulate hypotheses concerning the senior generation’s financial requirements for the remaining years of their lives. This is not a simple undertaking; their future way of life needs to be projected, and their financial requirements need to be established accordingly. Because so few elderly people keep detailed records of the expenses associated with their current way of life, the task at hand is made more difficult. As a direct consequence of this, people frequently underestimate the cost of living.

The goal of this exercise is to calculate the financial investments that will be required to meet a conservative estimate of the ongoing financial needs of the older generation. When estimating income from invested assets as well as costs and expenses, it is important to make assumptions that are on the conservative side.

In any process of transition planning, your chances of establishing a successful multi-generational family business will be higher if you smartly strategize both the family and the business sides of the formula. This is because family dynamics and business dynamics are inextricably intertwined.