CHAPTER 3 - Research Methods
3.1 The Case Study Approach
The research method used was to interview and analyse ten case studies of intergenerational farm transfer. To date no detailed financial analysis of succession in New Zealand farms appears to have been done. Keating and Little (199 1) used the Grounded Theory method to develop hypotheses about the transfer of farms within Canterbury families, then followed it up with a detailed survey (1993) with face to face interviews of the members of sixty farming families. Similarly Greenwood (1990) used the questionnaire method to survey farms at random throughout a farming district in Northland.
The case study method has the drawback that the results cannot claim to be representative of New Zealand farms in general. However the information from a small number of farms can be analysed in much more detail and used to cross check the findings of the wider surveys. The close financial budgeting may also point to trends, issues or anomalies missed in the broader approach.
Ten case study farms were selected in the Canterbury Province of New Zealand. They were selected by personal contact which meant that a certain level of trust and familiarity with the interviewer had been established before the survey. Most farmers approached were willing to participate. Two who were not used the reason that the exercise of passing the farm on had been so traumatic they would rather not discuss it.
Farmers were chosen to give a range of farm types, and in all cases were family farms where children had recently taken over or where plans were being developed for children to take over in future.
3.2 Interviews
A series of broad topics to be discussed was drawn up before the interviews (see Appendix 1) and during the initial contact it was indicated that the farmers' plans for succession would be discussed, and dollar figures put on the resulting living standard of the parents and the viability of the farm after it was passed on.
Interviews were conducted on the farms, usually at the kitchen table with notes taken by hand as unobtrusively as possible. The interview was guided by the interviewer but the farmers were given scope to discuss issues of concern and express opinions.
The principal person interviewed was generally the father, with or without his wife or son present. In two cases the interviews were with the son who had recently taken over the farm.
In two cases where the plans of the parents were less well developed, they expressed an interest in talking over succession with the interviewer who they assumed was an "expert" on the subject. Consequently there may have been feedback from the interviewer, which served to evolve succession plans during the interview.
3.3 Financial Analysis
Following the interview the discussion of the farm itself, the family structure, attitudes to succession and the mechanism of the planned transfer were written up.
The parents' long term cash income was then estimated using their capital, less an allowance for house and car, including all sources of income from investments, mortgages and National Superannuation. Income tax and National Superannuation Surcharge were deducted to give a net cash income figure. The result is the cash income available to provide a living standard for the parents in their retirement.
To establish a base year a cash forecast budget for 1993/1994 was drawn up with detailed work sheets for livestock, crop, fertiliser and debt reconciliations. Using this base a status quo budget for the farm following succession was drawn up. Assumptions used are listed in Appendix 11. The result of the status quo budget is a sustainable cash surplus net of tax which is available for profit and personal expenses. This figure can be used to discuss the viability of the farm after the process of succession. Twenty three detailed budgets with full worksheets were completed.
To make the information more accessible the budgets are presented in a one-page summary for each farm. The important details of the ten farms are consolidated in a further summary.
3.4 Confidentiality
In order to protect confidential personal and financial information the identity of the case study farms has been hidden as much as possible. Numbers are used instead of names and personal details which may identify the farmers have been omitted.
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