The future of the family business

To ensure continuity, a succession plan is absolutely essential for every family business. And this is regardless of whether the family runs a global empire, family farm or corner store. 

Many businesses in Australia are family-owned and the owners are often too busy dealing with today’s operations to worry about tomorrow. However, putting off establishing a clear-cut succession plan in a family business will lead to future problems and can drive a deep wedge into the closest of families. 

History shows that succession is the Achilles Heel of the family business. Most do not make it past the first generation; and of those only ten percent reach the third generation.

Here are six steps that should be followed to ensure that your family business succession is a success:

1. Board Meetings or formal family meetings should be held regularly. There must be a defined business agenda and open discussions encouraged to ensure no break-down of communication between all of the family members involved in the business.
2. Plan for the exit of the older generation by setting dates and establishing retirement funds to ensure that they are well provided for.  If you fail to have the total support of the older generation they are unlikely to relinquish their position.
3. Who replaces the older generation at the helm of the family business is a vital issue because in order for the business to succeed it may not always be appropriate for the eldest son to automatically take the lead (whether he expects to or not!).  There must be full and frank discussions on this issue and firm decisions made.
4. Seek professional advice. It is crucial that all-important planning issues are discussed with your accountant, solicitor and financial planner.
5. Dates for future meetings must be set so that discussions continue until a plan that provides for all family members in the business has been completed.
6. It is imperative that you keep your plan current. Succession plans require periodic revision and updating to ensure that what you have agreed upon remains relevant.

There is an old saying. “The first generation makes it; the second generation takes it; the third generation breaks it.” 

Times have not really changed in this area, but the simple and commonsense approach of preparing in advance, seeking professional advice and sound, unemotional management, will set the future of the business in good stead. To make an appointment with one of Stature Accounting’s business consulting and succession planning specialists, contact us on 02 8256 2100. Don’t let your grandchildren spend what you’ve dedicated your life to. 

Source:

Succeeding Generations: Realising the dream of families in business, Ivan Landsberg