What is your estate or farm actually for?

Rural estate and farm owners, and tenants, are being encouraged to develop strategies for farming, natural capital, planning, energy, succession and diversification, but there is a danger in developing strategies before answering a much more fundamental question: What is your estate or farm actually for?

It sounds simple. In practice, it can be one of the hardest questions a landowning family can face. Ask each member of the same family separately, and you often receive very different answers. One might say the purpose is to preserve the land for the next generation. Another might prioritise generating income for the family. Someone else may be passionate about farming, while the next generation sees greater opportunity in property, energy or diversification. None of those answers is necessarily wrong, but the problem arises when nobody has agreed on which matters most.

The external pressures facing rural estates are considerable and creating opportunities and challenges across almost every part of the rural economy. There is an understandable temptation to concentrate on the immediate. Should you invest in your estate’s farming infrastructure? Convert redundant buildings? Promote land for development? Enter a long-term environmental agreement? Develop renewable energy? Sell an asset and reduce debt? Transfer assets between generations? Or retain capital and wait? 

The need for estates to define their purpose has not been created by the current policy environment. It has, however, exposed the consequences of not having one. The uncertainty which the rural sector inevitably faces also highlights the value of long-term thinking. Rural businesses can’t reinvent their strategy every time policy changes, and decisions taken in reaction to an announcement – or in anticipation of one – can have generational consequences.

Who is it for?

Behind the question of what an estate is for sits another, potentially more uncomfortable one - who is it for? The current owner? The next generation? The wider family? The farming business? The people who live and work there? Future generations?  For most estates, the answer will involve several of these, but their interests do not always align. 

An estate cannot necessarily maximise current family income, reinvest heavily for future generations, preserve every heritage asset, maintain low levels of borrowing and fund every new opportunity simultaneously. At some point, priorities have to be established. This has become particularly relevant as families consider the implications of inheritance tax. 

Tax planning is important, and specialist advice is essential, but tax should not become the estate strategy. Decisions aimed solely at reducing a future liability can sometimes inadvertently weaken the very business the family is trying to pass on. People often talk about succession solely in terms of tax, ownership structures and the transfer of assets. While these things are important, successful succession is also about transferring responsibility and, ultimately, leadership.

The next generation may not want to manage an estate in exactly the same way as their parents, but that should not automatically be regarded as a problem. They may bring different skills, interests and attitudes to risk. They may see opportunities in areas that barely existed when the current generation took responsibility. And they may ask questions about established practices that previous generations have stopped asking. 

Good stewardship involves embracing change

There is an understandable instinct within many long-established estates to preserve what previous generations have handed down. That sense of stewardship is one of the great strengths of rural landownership. Decisions are often considered over generations rather than financial quarters. There is nothing wrong with deciding that preserving an estate intact is the overriding objective. For some families, it absolutely should be. But that decision has consequences. The business still needs to generate sufficient cash to maintain its assets, service borrowing, meet taxation, support the family where appropriate and fund future investment. 

Preservation without the financial means to sustain it is not stewardship, it is postponing a difficult decision. Rural estates have never really stood still. Previous generations bought and sold land, changed farming systems, converted buildings, planted woodland, built houses and created new businesses. What we sometimes regard today as the traditional estate is itself the product of generations of adaptation. Good stewardship isn’t about ensuring that nothing changes – sometimes it is about changing something today to ensure there is something worth handing on tomorrow.

Core assets vs sacred assets

When reviewing an estate, it is useful to identify which assets are genuinely core.  A core asset contributes fundamentally to the purpose, identity or long-term resilience of the estate. A sacred asset may simply be something nobody has felt able to question because it has always been there. They are not necessarily the same thing. One of the questions I often ask is: “If you didn’t already own this asset today, would you choose to acquire it?” 

Sometimes the answer is an immediate yes, sometimes the discussion becomes considerably more interesting. This is not an argument for selling assets simply because their financial return is modest. A woodland, historic building, farm or piece of landscape may be fundamental to an estate despite producing little direct income as not everything needs to maximise financial return. We should understand why it is owned and what owning it costs, not simply financially, but in terms of capital and opportunities elsewhere. 

The distinction between purpose and habit

Perhaps nowhere is the distinction between purpose and habit more apparent than in farming. Many estates farm because they have always farmed. The land has been farmed in-hand for generations, the machinery is there, the team is there and the farming business has become part of the estate’s identity. There can, of course, be very good reasons for continuing to farm. But there is an important difference between choosing to farm and simply continuing to farm because nobody has ever seriously considered any alternatives. For a family whose identity has been bound up with agriculture for generations, asking whether the estate should continue farming in the same way can feel almost like questioning the estate itself. It isn’t. 

The question is not whether farming matters, it is whether the current farming model best serves the estate’s objectives. That means being prepared to ask:

• What capital does it employ? 
• What return does it generate? 
• How much management time does it consume? 
• What risk does the estate carry? 
• What investment will it require over the next five or ten years? 
• What else could that capital and management resource be doing? 

Importantly, the return does not have to be purely financial. An estate may consciously accept a lower financial return because farming delivers control, landscape, employment, family involvement or simply enjoyment. That is perfectly rational, provided it is a conscious decision. 

Even then, there may be choices. Should the estate farm everything in-hand? Could some land be let? Would contract farming provide a better balance between control, return and risk? Could the farming system itself change? Should capital be concentrated on the most productive parts of the enterprise while other land delivers different outcomes? Changing the model does not mean abandoning farming and deciding to let land, enter a partnership or stop farming directly shouldn’t necessarily be regarded as failure.

The framing of the questions can make all the difference to the conversation. Rather than asking: “Should we stop doing X ?”, ask: “If we were designing this estate business from scratch today, knowing what we know now, what role would X play within it?”. 

Capital can only be spent once

Purpose becomes particularly important when deciding where to invest. An estate may have a significant cash sum available and five apparently sensible ways of spending it. It could improve farming infrastructure, renovate residential property, develop commercial buildings, repay borrowing, invest in renewable energy or promote strategic land. All might produce a return. Every pound invested in one part of an estate is a pound that cannot be invested somewhere else. That sounds obvious. In practice, it is one of the most important disciplines in running a diverse rural business. 

Uncertainty can lead to inaction, but deferring decisions until the next Budget or policy announcement comes with risks. Buildings still require maintenance. Farming businesses still require machinery and infrastructure. Employees need development. New enterprises require capital. Opportunities have windows in which they can be captured. 

So the question is not simply which opportunity offers the highest theoretical return. It is which best advances the long-term objectives of the estate while recognising risk, liquidity, taxation, timescale and the needs of the family. 

The same thinking should apply to disposals. Selling land or property often carries an emotional implication of failure within some estate businesses. It shouldn’t - there is an enormous difference between being forced to sell because earlier decisions have left no alternative and choosing to sell a non-core asset because the capital can work harder elsewhere. Sometimes the sale of one asset is precisely what protects the rest. 

A disposal might reduce borrowing, fund investment in the core estate, facilitate succession, create a more resilient income stream, or it might simply remove an asset whose cost and management burden are disproportionate to its contribution. 

The important questions are: why are we selling, what are we protecting and what will we do with the capital afterwards? 

What does success look like?

Another critical part of defining purpose is agreeing on what success looks like. Some of the most difficult conversations within estates are framed as property, farming, tax or financial questions when the underlying disagreement is actually about something quite different. Different generations and sometimes members of the same generation may have fundamentally different ideas about what success looks like. One person may want to maximise income. Another may want to reinvest everything. Someone may want to build their career within the estate business. Their sibling may live hundreds of miles away and understandably have completely different expectations of ownership. None necessarily lacks commitment to the estate - they may simply have different interpretations of its purpose.

Bringing those differences into the open can be uncomfortable, but it can also be transformational.

Creating a framework for good governance

Good governance provides the framework that ensures that purpose feeds through into action. As estates become more complex, clarity of purpose needs to be matched by clarity around decision-making. Who makes the final decision? Who is consulted? What role does the next generation play? Where do professional advisors fit? And how are significant decisions challenged before capital is committed? 

For some estates and farms, conversations around the kitchen table remain entirely appropriate. For others, a family council, estate board or more structured decision-making process can be enormously valuable. The objective is not to introduce corporate bureaucracy into family life. It is to create a framework within which difficult decisions can be discussed properly. Good governance does not remove emotion from family decisions. It creates a structure in which emotion does not have to make the decision. 

Purpose shapes the future

There is no point in redefining purpose if it just results in a beautifully worded family mission statement which is subsequently filed away. It should help an estate decide which opportunities to pursue and, just as importantly, which to decline. It should inform where capital is invested, attitudes towards debt and risk, which assets are genuinely core and how succession is approached. It should also provide some common ground when family members disagree.

Purpose does not need to remain unchanged forever. Families and financial circumstances change, so a strong estate needs both a clear long-term direction and sufficient flexibility to respond to the world around it. 

The measure of good stewardship is surely not whether we hand the next generation exactly what we inherited. It is whether we hand them an estate that is relevant, resilient and capable of supporting whatever purpose the family has agreed for it. 

There is also nothing wrong with making an emotional decision about an estate, so long as you aren’t pretending it is a commercial one. That is why before deciding what to farm, develop, diversify, invest in, retain, transfer or sell, an estate needs to understand what it is ultimately trying to achieve. 

Contact Kate Moisson, Head of Rural, to discuss how defining your purpose can help put your business on the path to a more sustainable and profitable future.