Twenty-five years after they signed the papers to take over the farm, the Gilmer brothers at South Mountain in eastern Ontario knew it was time to get serious about passing down the family farm to the next generation.
Richard was ready to retire from farming. In fact, he had already bought a retirement home close by. Younger brother, Reg wanted to keep farming but was open to succession.
The time seemed right for the next generation too. Two of them were working on the farm full-time. They had taken some time for travelling, they d finished their post-secondary education, and they wanted to take over the business.
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Richard s son, James, enjoys managing the cows while nephew Jeff Marriner (Richard and Reg s sister s son) likes field work. Richard and wife Debbie also have two daughters and a younger son, Trevor. Reg and his wife, Charlene have two daughters.
The Gilmer family didn t let the complexity of their situation put them off. Nor were they scared off by the succession horror stories that floated around the concessions.
Instead, they used those inter-generational wrecks to inspire them to keep working at succession with open minds. These wrecks made them determined to maintain business manners, to compromise a little and to hire professionals to get the job done right.
In a nutshell, their final plan froze the value of the shares of the two brothers and set up a buy-in agreement for Richard s shares so the next generation could incrementally purchase shares of the corporation. This will slowly transfer ownership without the individuals or the corporation incurring debilitating or limiting debt.
This strategy is quite common with a corporate rollover or transition to the next generation, says Larry Morin, farm adviser with Canada Farm Business Advisory Services at Fort Saskatchewan, Alta. The crystallization allows the retiring generation to retain the equity that they built in the business and allows the next generation to start to share in the future growth of the company.
Naturally, the Gilmers structure is not a template for every situation. Each situation is unique, Morin says. A customized plan needs to be developed for each farm situation that takes into consideration the needs of each participant and the future of the company.
It also doesn t mean that it was a simple decision for the Gilmers to reach.
Although the Gilmers wanted this to work, their succession plan took nearly two years and about $30,000 of accountant, lawyer and financial adviser fees to create this structure and shareholder agreement.
You don t want to cut costs, says Richard.
Go slow and steady, he adds. But have some deadlines.
The plan took a ton of discussion. It demanded some soul searching and above all, it required commitment.
The Gilmers hired an old friend and certified financial adviser, John Anderson from Kingston, Ont., to facilitate. It helped to have someone chair and manage the discussions who was an outsider and who combined business know-how and an understanding of farming to chair the discussions.
buSineSS firSt
Farmers need to have someone come in and explain what they need to do, says Reg.
As part of the Growing Forward initiative, the Canadian Farm Business Management Council has created a national online list of farm business advisers and consultants called National Farm Business Advisor (FBA) Database at www.farmcentre.com.
The meetings involved only the current and soon-to-be shareholders the stakeholders of the corporation. Also, when the discussion turned to dollars, their long-time accountant joined them. Anderson chaired the meetings, kept the group on-topic, used business protocol and gave out homework forms to complete before the next meeting.
Anderson began by having the Gilmers each fill out forms to find out what they wanted.
Strategically, he also used the early days to lead the Gilmers
