The Family Business: A Looming Crisis
The pressure and demands of succession and the transfer of the family businesses discussed in this column over the past 4 years are now becoming a reality.
From our experience, the retiring business owners have not comprehended the complexity of the situation nor understood the impact and benefits of proactive planning in increasing the value of the business and their ability to achieve a transfer.
“Family businesses are finding it harder to prosper by following the old familiar ways”, according to the Business Review Weekly July 14 edition titled ‘The Family Line Buckles’.
“Over 60% of businesses are family-owned. They are more risk-averse, shun expansion, shy away from modern business practices such as marketing and public relations and do not pursue growth. They are unlikely to network with other business and have fewer members in the management team. They are a fragile employment environment, and very few have a working business plan.”
The business owner's average age is 58, the average age of the business – 38 years. Approximately 50% have no long term plan.
Approximately 50% of SME businesses will be transferring ownership and or management in the next 8 years.
It seems that Succession Planning is not regarded as a high priority issue. However, it’s an issue that will not go away.
Businesses can adopt many different strategies, including the building of:
a successful business that will attract the maximum price on sale or
a business that will be of value to the future generations of your family
Both of these strategies require the creation of a healthy, profitable business. Several processes can assist with both the development of the business and, if the latter option is selected, the succession process.
The three phases in any planning process are:
Identify where you currently stand NOW
Establish WHERE you want to be
Develop strategies and action plans that explain HOW you bridge the gap between where you are now and where you want to be.
How prepared is your business? We can help you assess your situation using our simple tools such as our ‘Succession Planning Diagnostic’ and ‘Growth and Profit Solutions Diagnostic’.
From here, we can assist you in developing and, more importantly, implementing business strategies that will add real value to your business and you achieving your objectives for your retirement and the business.
David Green states in the BRW article: “The family business must change to a ‘business first, not family first’ culture. They have no choice but to change and professionalize. Otherwise, they will not have a business.” We agree wholeheartedly.