John and Megan Hay’s own experiences with succession planning back in the early 2000’s has been the catalyst for prioritising their own dairy business path some 25 years later.
The couple have eight children ranging in age from 8-20 and they want to ensure if or when the time comes for succession, there is a clear path forward for everyone.
Megan said by having these conversations early and doing everything they can to prepare, hopefully the transition for the next generation will be less traumatic and far more productive.
“I’m under no illusion that it will be easy - change is never simple, but it doesn’t have to be contentious.
“I also want to ensure that, if we one day welcome sons- or daughters-in-law into the family farming business, they don’t have to experience the uncertainty and challenges that I faced.” Megan said.
John was the fourth child of six, and all the siblings were promised the farm would be theirs one day.
“At the time I came on the scene they mostly lived at home and the farm owned and paid for everything. There was minimal individual agency and honestly it was working for them.
“John and I just wanted something different as we started our own family.
“Above all we wanted to know what our role was so we could decide if we wanted to stay or go. It was a mess that took a decade to sort out.”
Megan said John’s siblings were all great but that had more to do with good fortune than good management.
In light of this experience, the couple decided to structure their own business to avoid history repeating itself.
Within the business there is an organisational hierarchy where people have definitive roles and people can move in and out and change roles relatively easily.
Under the company structure, the dairy business buys and sells milk while the partnership which Megan and John operate owns the assets like water, cattle, machinery and land. This is leased to the dairy business and the couple are paid a management fee.
The entities are all run separately of each other.
Megan said the first year of operating the company was a bit rough and their ratios were a bit harsh but they are continuing to iron that out and they are hoping they will soon have the basis for a workable plan for the next generation.
“When I was 20 I thought my mother-in-law was delusional for wanting all the kids home on the family farm but now at 42, I want there to be room for my kids to come home if they want, too.”
Open and honest communication has been the key to this process.
“We had a pretty tough experience and I hear horror stories of families and relationship impacted by succession planning all the time and we didn’t want that to be us in the future.
“We have been clear and transparent right though so the next generation won’t have to beg or take because the opportunity will be there for them if they want it - in theory any one of the kids could come along without much equity and take over the dairy business.”
Megan said making capital decisions is always difficult especially when they also would like to have some sort of exit strategy in the future.
“As we all know, dairy farming is capital intensive and it is hard to be disciplined to invest outside the business when you also want to keep growing it as well.”
She said they also use the services of Peppin Planners to help with decision making which the kids are also privy too.
“We do want our kids to do something besides farming and we think it is important for them to have their own individual success and develop experiences outside of the farm.”
Megan also added not one of the kids are tied to taking over the farm.
“We have written into our wills the farm does not have to be preserved and the kids are certainly not obligated to take it over, we do however want there to be a pathway forward if that is their purpose.
“We’re deeply grateful for the opportunities and support we received from both our families and without them, our journey would have been very different.
“We want to use what we’ve learned to create even better opportunities for our children. Their future is too important not to have the hard conversations.” Megan said.
The family business is expecting to milk 800 cows by the end of the year.
They recently built a 400 cow compost barn and are hoping to build another sometime in the future.
They have invested in land rather than water because rain is free and they are hoping to set up a sustainable and enduring business for the future.