Family-owned businesses are a huge part of the Australian economy. In fact, the account for 70 percent of all operative businesses in Australia. And succession is on the minds of many of their owners: 81 percent of family business owners are considering retirement within the next decade. But the fraction of those already working on a succession plan is far less significant.
So why is succession planning important to your family’s business?
Alarming research shows that only 30 percent of family businesses survive the transition from the first to the second generation. The statistics are even more grim for third generation businesses, with a survival rate of just 12 percent. But this doesn’t mean that family businesses are doomed to failure– not at all! The downfalls of these enterprises have a great deal to do with a reluctance to plan: nobody wants to think about the often-emotional process that will lead up to and follow the exit of a business’ leader, and –perhaps– its founding figure. This is compounded in the case of a family business, where those close emotional ties exist on every level of the business.
It is of the utmost importance to view succession planning as a vital imperative, rather than as just another item on the “to-do” list. Moving past concerns and anxieties is the first step to future success. Remember, putting off conflicts and hard discussions are not the same as avoiding them. So, what are these hard decisions and concerns?
Issue Number 1: Engagement
Imagine if the person you had always thought would take over your business had very different ideas. Perhaps they have no genuine interest in leadership within the business, even though they are happy to continue working there.
How this can be resolved through succession planning: Succession planning facilitates genuine and open discussions of these matters. It allows all stakeholders (and future stakeholders) to express their commitment to the business, ensuring that the most driven individual (or team of individuals) takes the helm after you have left. It turns what may have been implicit agreements into concrete plans.
Issue Number 2: Competency
When you are of retirement age, your children (your likely successors) may not have the wealth of experience needed to run the business. But, if you plan far enough in advance, you have every opportunity to train them in the necessary skills. You also have the ability to structure a plan that lets them know that their responsibilities will increase over time, and have their formalised agreement to this. It also highlights what outside resources will be necessary so that these can be provisioned for.
Issue Number 3: Legacy
This is a culmination of many factors. There is hardly a business owner who doesn’t think about what will happen to their business once they depart it. For the most of it, these business owners still live and socialise amongst communities in contact with their business, and consider their life’s work on the business an integral part of their legacy.
Engaging a succession expert, like Seaview Consulting, is a step towards dealing with this in a rational, justifiable way. But our approach isn’t devoid of emotion: emotion is an important part of this process. This is why we start all of our work with a frank discussion about what your concerns are, and what you value as a business owner. This ensures that these elements are a part of your plan, and are thus, passed on to the next generation.